þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 51-0414846 (I.R.S. employer identification no.) |
892 Ross Drive Sunnyvale, California (Address of principal executive offices) | 94089 (Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
September 30, | December 31, | ||||||
2016 | 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 374,182 | $ | 346,205 | |||
Short-term investments | 38,165 | 60,032 | |||||
Accounts receivable, net of allowance for doubtful accounts of $164 and $199 as of September 30, 2016 and December 31, 2015, respectively | 69,167 | 54,522 | |||||
Inventory | 430 | 485 | |||||
Deferred product costs | 1,840 | 2,228 | |||||
Deferred commissions | 18,822 | 19,314 | |||||
Prepaid expenses and other current assets | 15,512 | 5,695 | |||||
Total current assets | 518,118 | 488,481 | |||||
Property and equipment, net | 47,715 | 34,501 | |||||
Deferred product costs | 297 | 314 | |||||
Goodwill | 140,282 | 133,769 | |||||
Intangible assets, net | 43,089 | 41,330 | |||||
Long-term deferred commissions | 3,613 | 3,488 | |||||
Other assets | 5,720 | 3,733 | |||||
Total assets | $ | 758,834 | $ | 705,616 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 13,387 | $ | 14,081 | |||
Accrued liabilities | 45,315 | 35,053 | |||||
Capital lease obligations | 33 | 32 | |||||
Deferred rent | 558 | 496 | |||||
Deferred revenue | 239,103 | 182,195 | |||||
Total current liabilities | 298,396 | 231,857 | |||||
Convertible senior notes | 361,215 | 345,699 | |||||
Long-term capital lease obligations | 98 | 123 | |||||
Long-term deferred rent | 1,869 | 2,033 | |||||
Other long-term liabilities | 5,718 | 1,188 | |||||
Long-term deferred revenue | 41,436 | 41,531 | |||||
Total liabilities | 708,732 | 622,431 | |||||
Commitments and contingencies (note 5) | |||||||
Stockholders’ equity: | |||||||
Convertible preferred stock, $0.0001 par value; 5,000 shares authorized; no shares issued and outstanding | — | — | |||||
Common stock, $0.0001 par value; 200,000 shares authorized; 42,389 and 40,840 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 4 | 4 | |||||
Additional paid-in capital | 496,332 | 441,104 | |||||
Accumulated other comprehensive loss | (10 | ) | (23 | ) | |||
Accumulated deficit | (446,224 | ) | (357,900 | ) | |||
Total stockholders’ equity | 50,102 | 83,185 | |||||
Total liabilities and stockholders’ equity | $ | 758,834 | $ | 705,616 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue: | |||||||||||||||
Subscription | $ | 97,163 | $ | 67,223 | $ | 261,878 | $ | 184,857 | |||||||
Hardware and services | 2,621 | 1,926 | 6,813 | 5,601 | |||||||||||
Total revenue | 99,784 | 69,149 | 268,691 | 190,458 | |||||||||||
Cost of revenue:(1)(2) | |||||||||||||||
Subscription | 23,987 | 18,209 | 68,867 | 51,372 | |||||||||||
Hardware and services | 3,293 | 2,845 | 9,895 | 8,794 | |||||||||||
Total cost of revenue | 27,280 | 21,054 | 78,762 | 60,166 | |||||||||||
Gross profit | 72,504 | 48,095 | 189,929 | 130,292 | |||||||||||
Operating expense:(1)(2) | |||||||||||||||
Research and development | 24,493 | 20,000 | 70,734 | 54,367 | |||||||||||
Sales and marketing | 51,467 | 38,651 | 146,654 | 107,240 | |||||||||||
General and administrative | 8,393 | 9,961 | 41,996 | 25,789 | |||||||||||
Total operating expense | 84,353 | 68,612 | 259,384 | 187,396 | |||||||||||
Operating loss | (11,849 | ) | (20,517 | ) | (69,455 | ) | (57,104 | ) | |||||||
Interest expense | (5,920 | ) | (5,903 | ) | (17,529 | ) | (12,088 | ) | |||||||
Other expense, net | (228 | ) | (375 | ) | (528 | ) | (1,635 | ) | |||||||
Loss before provision for income taxes | (17,997 | ) | (26,795 | ) | (87,512 | ) | (70,827 | ) | |||||||
Provision for income taxes | (370 | ) | (219 | ) | (812 | ) | (493 | ) | |||||||
Net loss | $ | (18,367 | ) | $ | (27,014 | ) | $ | (88,324 | ) | $ | (71,320 | ) | |||
Net loss per share, basic and diluted | $ | (0.44 | ) | $ | (0.67 | ) | $ | (2.12 | ) | $ | (1.80 | ) | |||
Weighted average shares outstanding, basic and diluted | 42,109 | 40,072 | 41,604 | 39,536 | |||||||||||
(1) Includes stock-based compensation expense as follows: | |||||||||||||||
Cost of subscription revenue | $ | 2,080 | $ | 1,357 | $ | 5,439 | $ | 3,620 | |||||||
Cost of hardware and services revenue | $ | 375 | $ | 270 | $ | 1,120 | $ | 774 | |||||||
Research and development | $ | 6,019 | $ | 5,862 | $ | 17,498 | $ | 15,562 | |||||||
Sales and marketing | $ | 7,174 | $ | 5,469 | $ | 20,710 | $ | 15,495 | |||||||
General and administrative | $ | 4,315 | $ | 3,238 | $ | 12,387 | $ | 8,406 | |||||||
(2) Includes intangible amortization expense as follows: | |||||||||||||||
Cost of subscription revenue | $ | 2,223 | $ | 1,945 | $ | 6,458 | $ | 4,914 | |||||||
Research and development | $ | 15 | $ | 23 | $ | 45 | $ | 69 | |||||||
Sales and marketing | $ | 1,429 | $ | 1,242 | $ | 3,938 | $ | 3,839 | |||||||
General and administrative | $ | — | $ | — | $ | — | $ | 12 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net loss | $ | (18,367 | ) | $ | (27,014 | ) | $ | (88,324 | ) | $ | (71,320 | ) | |||
Other comprehensive (loss) income, net of tax: | |||||||||||||||
Unrealized (loss) gain on short-term investments, net | (8 | ) | (5 | ) | 13 | 20 | |||||||||
Comprehensive loss | $ | (18,375 | ) | $ | (27,019 | ) | $ | (88,311 | ) | $ | (71,300 | ) |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (88,324 | ) | $ | (71,320 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 22,713 | 17,940 | |||||
Loss on disposal of property and equipment | 305 | 124 | |||||
Amortization of investment premiums, net of accretion of purchase discounts | 52 | 91 | |||||
Recovery of allowance for doubtful accounts | (35 | ) | (258 | ) | |||
Stock-based compensation | 57,154 | 43,857 | |||||
Amortization of debt issuance costs and accretion of debt discount | 15,516 | 9,911 | |||||
Foreign currency transaction loss | 259 | 1,417 | |||||
Changes in assets and liabilities, net of effect of acquisitions: | |||||||
Accounts receivable | (14,834 | ) | 3,273 | ||||
Inventory | 55 | (339 | ) | ||||
Deferred product costs | 404 | (478 | ) | ||||
Deferred commissions | 366 | (3,759 | ) | ||||
Prepaid expenses | (2,469 | ) | (2,010 | ) | |||
Other current assets | 461 | 623 | |||||
Deferred income taxes | (23 | ) | 356 | ||||
Long-term assets | 48 | 45 | |||||
Accounts payable | 2,906 | (2,173 | ) | ||||
Accrued liabilities | 2,933 | 4,934 | |||||
Deferred rent | (103 | ) | (329 | ) | |||
Deferred revenue | 55,613 | 36,381 | |||||
Net cash provided by operating activities | 52,997 | 38,286 | |||||
Cash flows from investing activities | |||||||
Proceeds from sales and maturities of short-term investments | 103,062 | 34,459 | |||||
Purchase of short-term investments | (81,233 | ) | (48,078 | ) | |||
Purchase of property and equipment | (25,527 | ) | (18,127 | ) | |||
Payment to escrow account | (9,645 | ) | — | ||||
Acquisitions of businesses, net of cash acquired | (8,351 | ) | (40,054 | ) | |||
Net cash used in investing activities | (21,694 | ) | (71,800 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuance of common stock | 15,146 | 11,881 | |||||
Withholding taxes related to restricted stock net share settlement | (17,015 | ) | (12,456 | ) | |||
Payments of debt issuance costs | — | (371 | ) | ||||
Repayments of equipment loans and capital lease obligations | (24 | ) | (699 | ) | |||
Proceeds from issuance of convertible senior notes, net of discount | — | 223,790 | |||||
Holdback payments for prior acquisitions | (1,397 | ) | — | ||||
Net cash (used in) provided by financing activities | (3,290 | ) | 222,145 | ||||
Effect of exchange rate changes on cash and cash equivalents | (36 | ) | (797 | ) | |||
Net increase in cash and cash equivalents | 27,977 | 187,834 | |||||
Cash and cash equivalents | |||||||
Beginning of period | 346,205 | 180,337 | |||||
End of period | $ | 374,182 | $ | 368,171 | |||
Supplemental disclosure of noncash investing and financing information | |||||||
Unpaid purchases of property and equipment | $ | 5,169 | $ | 4,958 | |||
Liability awards converted to equity | $ | 6,059 | $ | 1,745 |
Low | High | ||
Patents | 4 | 5 | |
Developed technology | 3 | 7 | |
Customer relationships | 2 | 7 | |
Non-compete agreements | 2 | 4 | |
Order backlog | 1 | 3 | |
Trade names and trademarks | 1 | 5 |
• | Persuasive evidence of an arrangement exists; |
• | Delivery has occurred or services have been rendered; |
• | Sales price is fixed or determinable; and |
• | Collectability is reasonably assured. |
As of December 31, 2015 | |||||||||||
As reported | Adjustment | As adjusted | |||||||||
Short-term deferred commissions | $ | — | $ | 19,314 | $ | 19,314 | |||||
Long-term deferred commissions | $ | — | $ | 3,488 | $ | 3,488 | |||||
Accumulated deficit | $ | (380,702 | ) | $ | 22,802 | $ | (357,900 | ) |
Three months ended September 30, 2015 | Nine months ended September 30, 2015 | ||||||||||||||||||||||
As reported | Adjustment | As adjusted | As reported | Adjustment | As adjusted | ||||||||||||||||||
Operating expenses: Sales and marketing | $ | 40,070 | $ | (1,419 | ) | $ | 38,651 | $ | 110,999 | $ | (3,759 | ) | $ | 107,240 | |||||||||
Net loss | $ | (28,433 | ) | $ | 1,419 | $ | (27,014 | ) | $ | (75,079 | ) | $ | 3,759 | $ | (71,320 | ) | |||||||
Net loss per share, basic and diluted | $ | (0.71 | ) | $ | 0.04 | $ | (0.67 | ) | $ | (1.90 | ) | $ | 0.10 | $ | (1.80 | ) | |||||||
Weighted average shares outstanding, basic and diluted | 40,072 | — | 40,072 | 39,536 | — | 39,536 |
Three months ended September 30, 2015 | Nine months ended September 30, 2015 | ||||||||||||||||||||||
As reported | Adjustment | As adjusted | As reported | Adjustment | As adjusted | ||||||||||||||||||
Net loss | $ | (28,433 | ) | $ | 1,419 | $ | (27,014 | ) | $ | (75,079 | ) | $ | 3,759 | $ | (71,320 | ) | |||||||
Unrealized gains on short-term investments, net | $ | (5 | ) | $ | — | $ | (5 | ) | $ | 20 | $ | — | $ | 20 | |||||||||
Comprehensive loss | $ | (28,438 | ) | $ | 1,419 | $ | (27,019 | ) | $ | (75,059 | ) | $ | 3,759 | $ | (71,300 | ) |
Estimated Fair Value | Estimated Useful Life (in years) | |||
Customer relationships | $ | 7,600 | 6 | |
Developed technology | 3,900 | 4 | ||
Order backlog | 700 | 1 | ||
Deferred revenue assumed | (1,200 | ) | N/A | |
Goodwill | 6,513 | Indefinite | ||
$ | 17,513 |
Estimated Fair Value | Estimated Useful Life (in years) | |||
Current assets acquired | $ | 414 | N/A | |
Fixed assets acquired | 73 | N/A | ||
Liabilities assumed | (234 | ) | N/A | |
Deferred revenue assumed | (1,400 | ) | N/A | |
Deferred tax liability, net | (45 | ) | N/A | |
Customer relationships | 2,800 | 7 | ||
Order backlog | 900 | 3 | ||
Developed technology | 3,000 | 4 | ||
Goodwill | 6,060 | Indefinite | ||
$ | 11,568 |
Fair Value | Estimated Useful Life (in years) | |||
Fixed assets acquired | $ | 25 | N/A | |
Developed technology | 7,300 | 4 | ||
Goodwill | 1,175 | Indefinite | ||
$ | 8,500 |
Fair Value | Estimated Useful Life (in years) | |||
Current assets acquired | $ | 1,275 | N/A | |
Fixed assets acquired | 174 | N/A | ||
Liabilities assumed | (448 | ) | N/A | |
Deferred revenue assumed | (700 | ) | N/A | |
Holdback liability to the sellers | (3,662 | ) | N/A | |
Trade names | 200 | 2 | ||
Customer relationships | 4,200 | 7 | ||
Order backlog | 200 | 1 | ||
Developed technology | 7,900 | 7 | ||
Goodwill | 19,054 | Indefinite | ||
$ | 28,193 |
Balance at December 31, 2015 | $ | 133,769 | |
Add: Goodwill from acquisition | 6,513 | ||
Less: Other purchase price allocation adjustments to Goodwill | — | ||
Balance at September 30, 2016 | $ | 140,282 |
September 30, 2016 | December 31, 2015 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
Developed technology | $ | 61,168 | $ | (35,076 | ) | $ | 26,092 | $ | 57,268 | $ | (28,618 | ) | $ | 28,650 | |||||||||
Customer relationships | 17,943 | (2,531 | ) | 15,412 | 23,382 | (12,291 | ) | 11,091 | |||||||||||||||
Non-compete agreements | — | — | — | 804 | (691 | ) | 113 | ||||||||||||||||
Trade names and patents | 930 | (607 | ) | 323 | 1,006 | (502 | ) | 504 | |||||||||||||||
Order backlog | 1,600 | (338 | ) | 1,262 | 1,300 | (328 | ) | 972 | |||||||||||||||
$ | 81,641 | $ | (38,552 | ) | $ | 43,089 | $ | 83,760 | $ | (42,430 | ) | $ | 41,330 |
Year ending December 31, | |||
2016, remainder | $ | 3,128 | |
2017 | 11,867 | ||
2018 | 10,771 | ||
2019 | 7,406 | ||
2020 | 4,701 | ||
Thereafter | 5,216 | ||
$ | 43,089 |
• | Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities. |
• | Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. |
• | Level 3: Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation. |
Balance as of September 30, 2016 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||
Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 318,074 | $ | 318,074 | $ | — | $ | — | |||||||
Corporate debt securities | 1,500 | — | 1,500 | — | |||||||||||
Commercial paper | 17,737 | — | 17,737 | — | |||||||||||
Short-term investments: | |||||||||||||||
Corporate debt securities | 22,416 | — | 22,416 | — | |||||||||||
Commercial papers | 15,749 | — | 15,749 | — | |||||||||||
Total financial assets | $ | 375,476 | $ | 318,074 | $ | 57,402 | $ | — | |||||||
Liabilities | |||||||||||||||
Acquisition-related contingent liability | $ | 9,162 | $ | — | $ | — | $ | 9,162 |
Balance as of December 31, 2015 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||
Assets | |||||||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 306,983 | $ | 306,983 | $ | — | $ | — | |||||||
Corporate debt securities | 3,178 | — | 3,178 | — | |||||||||||
Commercial paper | 8,996 | — | 8,996 | — | |||||||||||
Short-term investments: | |||||||||||||||
Corporate debt securities | 36,527 | — | 36,527 | — | |||||||||||
Commercial paper | 16,290 | — | 16,290 | — | |||||||||||
U.S. agency securities | 5,414 | — | 5,414 | — | |||||||||||
U.S. Treasury securities | 1,801 | — | 1,801 | — | |||||||||||
Total financial assets | $ | 379,189 | $ | 306,983 | $ | 72,206 | $ | — |
September 30, 2016 | |||||||||||||||
Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Cash and cash equivalents: | |||||||||||||||
Cash | $ | 36,871 | $ | — | $ | — | $ | 36,871 | |||||||
Money market funds | 318,074 | — | — | 318,074 | |||||||||||
Corporate debt securities | 1,500 | — | — | 1,500 | |||||||||||
Commercial paper | 17,737 | — | — | 17,737 | |||||||||||
Total | $ | 374,182 | $ | — | $ | — | $ | 374,182 | |||||||
Short-term investments: | |||||||||||||||
Corporate debt securities | $ | 22,426 | $ | — | $ | (10 | ) | $ | 22,416 | ||||||
Commercial paper | 15,749 | — | — | 15,749 | |||||||||||
Total | $ | 38,175 | $ | — | $ | (10 | ) | $ | 38,165 |
December 31, 2015 | |||||||||||||||
Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
Cash and cash equivalents: | |||||||||||||||
Cash | $ | 27,048 | $ | — | $ | — | $ | 27,048 | |||||||
Money market funds | 306,983 | — | — | 306,983 | |||||||||||
Corporate debt securities | 3,178 | — | — | 3,178 | |||||||||||
Commercial papers | 8,996 | — | — | 8,996 | |||||||||||
Total | $ | 346,205 | $ | — | $ | — | $ | 346,205 | |||||||
Short-term investments: | |||||||||||||||
Corporate debt securities | $ | 36,549 | $ | — | $ | (22 | ) | $ | 36,527 | ||||||
Certificate of deposit | 16,290 | — | — | 16,290 | |||||||||||
U.S. agency securities | 5,415 | — | (1 | ) | 5,414 | ||||||||||
U.S. Treasury securities | 1,801 | — | — | 1,801 | |||||||||||
Total | $ | 60,055 | $ | — | $ | (23 | ) | $ | 60,032 |
Capital Leases | Operating Leases | ||||||
Year ending December 31, | |||||||
2016, remainder | $ | 11 | $ | 5,867 | |||
2017 | 41 | 7,448 | |||||
2018 | 39 | 5,191 | |||||
2019 | 37 | 4,647 | |||||
2020 | 21 | 1,900 | |||||
Thereafter | — | 3,062 | |||||
Total minimum lease payments | 149 | $ | 28,115 | ||||
Less: Amount representing interest | (18 | ) | |||||
Present value of capital lease obligations | 131 | ||||||
Less: current portion | (33 | ) | |||||
Long-term portion of capital lease obligations | $ | 98 |
• | during the calendar quarter commencing after September 30, 2015, if the last reported sale price of the Company's common stock is greater than or equal to 130% of the applicable conversion price on each such trading day for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; |
• | during the 5 business day period after any 5 consecutive trading day period in which the trading price, as defined, per $1 principal amount of the 0.75% Notes for each trading day of such measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the applicable conversion rate on each such trading day; |
• | upon a notice of redemption by the Company; or |
• | upon the occurrence of specified corporate transactions. |
• | during the calendar quarter commencing after March 31, 2014, if the last reported sale price of the Company's common stock is greater than or equal to 130% of the applicable conversion price on each such trading day for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter; |
• | during the 5 business day period after any 5 consecutive trading day period in which the trading price, as defined, per $1 principal amount of the 1.25% Notes for each trading day of such measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the applicable conversion rate on each such trading day; |
• | upon a notice of redemption by the Company; or |
• | upon the occurrence of specified corporate transactions. |
September 30, 2016 | |||||||||||
0.75% Notes | 1.25% Notes | Total | |||||||||
Liability component: | |||||||||||
Principal | $ | 230,000 | $ | 201,250 | $ | 431,250 | |||||
Less: debt discount and issuance costs, net of amortization | (46,724 | ) | (23,311 | ) | (70,035 | ) | |||||
Net carrying amount | $ | 183,276 | $ | 177,939 | $ | 361,215 | |||||
Equity component (1) | $ | 54,049 | $ | 43,293 | $ | 97,342 |
December 31, 2015 | |||||||||||
0.75% Notes | 1.25% Notes | Total | |||||||||
Liability component: | |||||||||||
Principal | $ | 230,000 | $ | 201,250 | $ | 431,250 | |||||
Less: debt discount and issuance costs, net of amortization | (54,952 | ) | (30,599 | ) | (85,551 | ) | |||||
Net carrying amount | $ | 175,048 | $ | 170,651 | $ | 345,699 | |||||
Equity component (1) | $ | 54,049 | $ | 43,293 | $ | 97,342 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Interest expense related to contractual interest coupon | $ | 1,060 | $ | 1,060 | $ | 3,180 | $ | 2,380 | |||||||
Amortization of debt discount and issuance costs | 5,248 | 4,949 | 15,516 | 9,911 | |||||||||||
$ | 6,308 | $ | 6,009 | $ | 18,696 | $ | 12,291 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Expected life (in years) | 6.08 | 6.08 | 5.31 - 6.08 | 5.31 - 6.08 | |||||||
Volatility | 45 | % | 50 | % | 45 | % | 50% - 52% | ||||
Risk-free interest rate | 1.3 | % | 1.8 | % | 1.3% - 1.4% | 1.6% - 1.8% | |||||
Dividend yield | — | % | — | % | — | % | — | % |
Shares subject to Options Outstanding | ||||||||||||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||
Balance at December 31, 2015 | 4,042 | $ | 15.10 | 5.77 | $ | 201,736 | ||||||
Options granted | 237 | 54.11 | ||||||||||
Options exercised | (881 | ) | 12.09 | |||||||||
Options forfeited and canceled | (24 | ) | 42.08 | |||||||||
Balance at September 30, 2016 | 3,374 | $ | 18.43 | 5.52 | $ | 190,386 |
RSUs and PSUs Outstanding | ||||||
Number of Shares | Granted Fair Value Per Unit | |||||
Awarded and unvested at December 31, 2015 | 3,311 | $ | 47.94 | |||
Awards granted | 1,001 | 59.17 | ||||
Awards vested | (793 | ) | 42.21 | |||
Awards forfeited | (244 | ) | 52.86 | |||
Awarded and unvested at September 30, 2016 | 3,275 | $ | 52.40 |
As of September 30, | |||||
2016 | 2015 | ||||
Stock options to purchase common stock | 3,374 | 4,331 | |||
Restricted stock units | 3,274 | 3,229 | |||
Employee stock purchase plan | 104 | 78 | |||
Common stock subject to repurchase | 78 | 54 | |||
Bonus and other liability awards | 128 | 185 | |||
1.25% Convertible senior notes | 5,158 | 5,158 | |||
0.75% Convertible senior notes | 2,831 | 2,831 | |||
Total | 14,947 | 15,866 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Total revenue by solution: | |||||||||||||||
Protection and Advanced Threat | $ | 72,664 | $ | 47,920 | $ | 193,923 | $ | 129,506 | |||||||
Archiving, Privacy and Governance | 27,120 | 21,229 | 74,768 | 60,952 | |||||||||||
Total revenue | $ | 99,784 | $ | 69,149 | $ | 268,691 | $ | 190,458 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Total revenue: | |||||||||||||||
United States | $ | 82,971 | $ | 56,726 | $ | 223,327 | $ | 156,482 | |||||||
Rest of world | 16,813 | 12,423 | 45,364 | 33,976 | |||||||||||
Total revenue | $ | 99,784 | $ | 69,149 | $ | 268,691 | $ | 190,458 |
As of September 30, | As of December 31, | ||||||
2016 | 2015 | ||||||
Long-lived assets: | |||||||
United States | $ | 39,408 | $ | 29,514 | |||
Rest of world | 8,307 | 4,987 | |||||
Total long‑lived assets | $ | 47,715 | $ | 34,501 |
• | protecting users from the advanced attacks that target them via email, social media and mobile applications; |
• | preventing the theft or inadvertent loss of sensitive information and, in turn, ensuring compliance with regulatory data protection mandates; |
• | collecting, retaining, governing and discovering sensitive data for compliance and litigation support; and |
• | enabling organizations to respond quickly to security issues, providing both the intelligence and the context to prioritize incidents and orchestrate remediation actions. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(dollars in thousands) | (in thousands) | ||||||||||||||
Total revenue | $ | 99,784 | $ | 69,149 | $ | 268,691 | $ | 190,458 | |||||||
Growth | 44 | % | 37 | % | 41 | % | 37 | % | |||||||
Gross margin percentage | 73 | % | 70 | % | 71 | % | 68 | % | |||||||
Non-GAAP gross margin | 77 | % | 75 | % | 76 | % | 73 | % | |||||||
Billings (non-GAAP) | $ | 124,753 | $ | 84,964 | $ | 324,304 | $ | 226,839 | |||||||
Growth | 47 | % | 37 | % | 43 | % | 43 | % | |||||||
Adjusted EBITDA (non-GAAP) | $ | 14,954 | $ | 3,786 | $ | 23,939 | $ | 7,776 | |||||||
Free cash flows (non-GAAP) | $ | 17,953 | $ | 16,488 | $ | 27,470 | $ | 20,159 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
GAAP gross profit | $ | 72,504 | $ | 48,095 | $ | 189,929 | $ | 130,292 | |||||||
GAAP gross margin | 73 | % | 70 | % | 71 | % | 68 | % | |||||||
Plus: | |||||||||||||||
Stock-based compensation expense | 2,455 | 1,627 | 6,559 | 4,394 | |||||||||||
Intangible amortization expense | 2,223 | 1,945 | 6,458 | 4,914 | |||||||||||
Non-GAAP gross profit | $ | 77,182 | $ | 51,667 | $ | 202,946 | $ | 139,600 | |||||||
Non-GAAP gross margin | 77 | % | 75 | % | 76 | % | 73 | % |
• | Billings is not a substitute for revenue, as trends in billings are not necessarily directly correlated to trends in revenue; |
• | Billings is affected by a combination of factors including the timing of renewals, the sales of our solutions to both new and existing customers, the relative duration of contracts sold, and the relative amount of business derived from strategic partners. As each of these elements has unique characteristics in the relationship between billings and revenue, our billings activity is not necessarily closely correlated to revenue; and |
• | Other companies, including companies in our industry, may not use billings, may calculate billings differently, or may use other financial measures to evaluate their performance ‑ all of which reduce the usefulness of billings as a comparative measure. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Total revenue | $ | 99,784 | $ | 69,149 | $ | 268,691 | $ | 190,458 | |||||||
Deferred revenue | |||||||||||||||
Ending | 280,539 | 199,756 | 280,539 | 199,756 | |||||||||||
Beginning | 254,370 | 183,941 | 223,726 | 162,675 | |||||||||||
Net change | 26,169 | 15,815 | 56,813 | 37,081 | |||||||||||
Less: deferred revenue contributed by acquisitions | (1,200 | ) | — | (1,200 | ) | (700 | ) | ||||||||
Billings | $ | 124,753 | $ | 84,964 | $ | 324,304 | $ | 226,839 |
• | Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and facilitates comparisons with our peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and |
• | It is useful to exclude certain non-cash charges, such as depreciation, amortization of intangible assets and stock-based compensation, and acquisition- and litigation-related (income) expenses from adjusted EBITDA because the amount of such expenses in any specific period may not be directly correlated to the underlying performance of our business operations and these expenses can vary significantly between periods as a result of new acquisitions, full amortization of previously acquired tangible and intangible assets, the timing of new stock‑based awards or litigation-related (income) expenses, as the case may be. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Net loss | $ | (18,367 | ) | $ | (27,014 | ) | $ | (88,324 | ) | $ | (71,320 | ) | |||
Depreciation | 4,425 | 3,303 | 12,272 | 9,106 | |||||||||||
Amortization of intangible assets | 3,667 | 3,210 | 10,441 | 8,834 | |||||||||||
Interest expense | 5,920 | 5,903 | 17,529 | 12,088 | |||||||||||
Provision for income taxes | 370 | 219 | 812 | 493 | |||||||||||
EBITDA | (3,985 | ) | (14,379 | ) | (47,270 | ) | (40,799 | ) | |||||||
Stock-based compensation expense | 19,963 | 16,196 | 57,154 | 43,857 | |||||||||||
Acquisition-related expense | 464 | 190 | 586 | 551 | |||||||||||
Litigation-related (income) expense, net | (1,716 | ) | 1,404 | 12,941 | 2,532 | ||||||||||
Other expense, net | 228 | 375 | 528 | 1,635 | |||||||||||
Adjusted EBITDA | $ | 14,954 | $ | 3,786 | $ | 23,939 | $ | 7,776 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
GAAP cash flows provided by operating activities: | $ | 27,286 | $ | 24,188 | $ | 52,997 | $ | 38,286 | |||||||
Less: | |||||||||||||||
Purchases of property and equipment | (9,333 | ) | (7,700 | ) | (25,527 | ) | (18,127 | ) | |||||||
Non-GAAP free cash flows | $ | 17,953 | $ | 16,488 | $ | 27,470 | $ | 20,159 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Amount | % of revenue | Amount | % of revenue | Amount | % of revenue | Amount | % of revenue | ||||||||||||||||||||
($ in thousands) | ($ in thousands) | ||||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||||
Subscription | $ | 97,163 | 97 | % | $ | 67,223 | 97 | % | $ | 261,878 | 97 | % | $ | 184,857 | 97 | % | |||||||||||
Hardware and services | 2,621 | 3 | 1,926 | 3 | 6,813 | 3 | 5,601 | 3 | |||||||||||||||||||
Total revenue | 99,784 | 100 | 69,149 | 100 | 268,691 | 100 | 190,458 | 100 | |||||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||||||
Subscription | 23,987 | 24 | 18,209 | 26 | 68,867 | 25 | 51,372 | 27 | |||||||||||||||||||
Hardware and services | 3,293 | 3 | 2,845 | 4 | 9,895 | 4 | 8,794 | 5 | |||||||||||||||||||
Total cost of revenue | 27,280 | 27 | 21,054 | 30 | 78,762 | 29 | 60,166 | 32 | |||||||||||||||||||
Gross profit | 72,504 | 73 | 48,095 | 70 | 189,929 | 71 | 130,292 | 68 | |||||||||||||||||||
Operating expense: | |||||||||||||||||||||||||||
Research and development | 24,493 | 25 | 20,000 | 29 | 70,734 | 26 | 54,367 | 29 | |||||||||||||||||||
Sales and marketing | 51,467 | 52 | 38,651 | 56 | 146,654 | 55 | 107,240 | 56 | |||||||||||||||||||
General and administrative | 8,393 | 8 | 9,961 | 15 | 41,996 | 16 | 25,789 | 13 | |||||||||||||||||||
Total operating expense | 84,353 | 85 | 68,612 | 100 | 259,384 | 97 | 187,396 | 98 | |||||||||||||||||||
Operating loss | (11,849 | ) | (12 | ) | (20,517 | ) | (30 | ) | (69,455 | ) | (26 | ) | (57,104 | ) | (30 | ) | |||||||||||
Interest expense | (5,920 | ) | (6 | ) | (5,903 | ) | (9 | ) | (17,529 | ) | (7 | ) | (12,088 | ) | (6 | ) | |||||||||||
Other expense, net | (228 | ) | — | (375 | ) | — | (528 | ) | — | (1,635 | ) | (1 | ) | ||||||||||||||
Loss before provision for income taxes | (17,997 | ) | (18 | ) | (26,795 | ) | (39 | ) | (87,512 | ) | (33 | ) | (70,827 | ) | (37 | ) | |||||||||||
Provision for income taxes | (370 | ) | — | (219 | ) | — | (812 | ) | — | (493 | ) | — | |||||||||||||||
Net loss | $ | (18,367 | ) | (18 | )% | $ | (27,014 | ) | (39 | )% | $ | (88,324 | ) | (33 | )% | $ | (71,320 | ) | (37 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||
Revenue | |||||||||||||||||||||
Subscription | $ | 97,163 | $ | 67,223 | 45 | % | $ | 261,878 | $ | 184,857 | 42 | % | |||||||||
Hardware and services | 2,621 | 1,926 | 36 | 6,813 | 5,601 | 22 | |||||||||||||||
Total revenue | $ | 99,784 | $ | 69,149 | 44 | % | $ | 268,691 | $ | 190,458 | 41 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||
Cost of revenue | |||||||||||||||||||||
Subscription | $ | 23,987 | $ | 18,209 | 32 | % | $ | 68,867 | $ | 51,372 | 34 | % | |||||||||
Hardware and services | 3,293 | 2,845 | 16 | 9,895 | 8,794 | 13 | |||||||||||||||
Total cost of revenue | $ | 27,280 | $ | 21,054 | 30 | % | $ | 78,762 | $ | 60,166 | 31 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||
Research and development | $ | 24,493 | $ | 20,000 | 22 | % | $ | 70,734 | $ | 54,367 | 30 | % | |||||||||
Percent of total revenue | 25 | % | 29 | % | 26 | % | 29 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||
Sales and marketing | $ | 51,467 | $ | 38,651 | 33 | % | $ | 146,654 | $ | 107,240 | 37 | % | |||||||||
Percent of total revenue | 52 | % | 56 | % | 55 | % | 56 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||
General and administrative | $ | 8,393 | $ | 9,961 | -16 | % | $ | 41,996 | $ | 25,789 | 63 | % | |||||||||
Percent of total revenue | 8 | % | 15 | % | 16 | % | 13 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||
Interest expense | $ | (5,920 | ) | $ | (5,903 | ) | — | % | $ | (17,529 | ) | $ | (12,088 | ) | (45 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||
Other expense, net | $ | (228 | ) | $ | (375 | ) | (39 | %) | $ | (528 | ) | $ | (1,635 | ) | (68 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||
Provision for income taxes | $ | (370 | ) | $ | (219 | ) | 69 | % | $ | (812 | ) | $ | (493 | ) | 65 | % |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Net cash provided by operating activities | $ | 52,997 | $ | 38,286 | |||
Net cash used in investing activities | $ | (21,694 | ) | $ | (71,800 | ) | |
Net cash (used in) provided by financing activities | $ | (3,290 | ) | $ | 222,145 |
• | an increase in amortization of intangible assets of $1.6 million due to the acquisitions made in 2016 and 2015, and an increase in depreciation of fixed assets of $3.2 million due to the increase in capital expenditure; |
• | stock-based compensation expenses increase of $13.3 million due to the increase in headcount and grants made; |
• | an increase in amortization of debt issuance costs and accretion of debt discount of $5.6 million primarily due to the issuance of the 0.75% Notes; |
• | an increase in deferred commissions change of $4.1 million due to higher deferred commission amortization in the nine months ended September 30, 2016 as compared to the same period last year, higher commissions rate in the fourth quarter of 2015 as compared to the same period in 2014 and shorter amortization period; |
• | an increase in accounts payable change of $5.1 million primarily due to $6.6 million settlement liability to Finjan outstanding as of September 30, 2016 (see Note 5 to the accompanying Condensed Consolidated Financial Statements); |
• | an increase in deferred revenue change of $19.2 million in the nine months ended September 30, 2016 due to higher billings, and; |
• | the increase was offset by a net loss change of $17.0 million, decrease in accounts receivable change of $18.1 million due to timing of collections and growth in billings, decrease in accrued liabilities change of $2.0 million due to the timing of compensation and other payments, and a reduction in foreign exchange loss of $1.2 million due to the higher depreciation of U.S. dollar in the nine months ended September 30, 2015. |
• | expenditure of significant financial and development resources in efforts to analyze, correct, eliminate or work around errors or defects or to address and eliminate vulnerabilities; |
• | loss of existing or potential partners or customers; |
• | loss or disclosure of our customers’ confidential information, or the inability to access such information; |
• | loss of our proprietary technology; |
• | our solutions being susceptible to hacking or electronic break-ins or otherwise failing to secure data; |
• | delayed or lost revenue; |
• | delay or failure to attain market acceptance; |
• | lost market share; |
• | negative publicity, which could harm our reputation; or |
• | litigation, regulatory inquiries or investigations that would be costly and harm our reputation. |
• | fluctuations in currency exchange rates, which may cause our revenues and operating results to differ materially from expectations; |
• | our lack of familiarity with commercial and social norms and customs in other countries which may adversely affect our ability to recruit, retain and manage employees in these countries; |
• | difficulties and costs associated with staffing and managing foreign operations; |
• | the potential diversion of management’s attention to oversee and direct operations that are geographically distant from our U.S. headquarters; |
• | compliance with multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations; |
• | legal systems in which our ability to enforce and protect our rights may be different or less effective than in the United States, including more limited protection for intellectual property rights in some countries; |
• | immaturity of compliance regulations in other jurisdictions, which may lower demand for our solutions; |
• | greater difficulty with payment collections and longer payment cycles; |
• | higher employee costs and difficulty terminating non-performing employees; |
• | differences in workplace cultures; |
• | the need to adapt our solutions for specific countries; |
• | our ability to comply with differing technical and certification requirements outside the United States; |
• | tariffs, export controls and other non-tariff barriers such as quotas and local content rules; |
• | adverse tax consequences; |
• | restrictions on the transfer of funds; |
• | anti-bribery compliance by us or our partners, including under the Foreign Corrupt Practices Act and similar laws of other jurisdictions; and |
• | new and different sources of competition. |
• | variations in our revenue, billings, gross margin, operating results, free cash flow, loss per share and how these results compare to analyst expectations; |
• | forward looking guidance that we may provide regarding financial metrics such as billings, revenue, gross margin, operating results, free cash flow, and loss per share; |
• | announcements of technological innovations, new products or services, strategic alliances, acquisitions or significant agreements by us or by our competitors; |
• | disruptions in our cloud-based operations or services or disruptions of other prominent cloud-based operations or services; |
• | the economy as a whole, market conditions in our industry, and the industries of our customers; |
• | trading activity by directors, executive officers and significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares; |
• | the size of our market float and significant option exercises; |
• | any future issuances of securities; |
• | sales and purchases of any common stock issued upon conversion of our convertible notes; and |
• | any other factors discussed herein. |
• | make it difficult for us to pay other obligations; |
• | make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes; |
• | require us to dedicate a substantial portion of our cash flow from operations to service the indebtedness, reducing the amount of cash flow available for other purposes; and |
• | limit our flexibility in planning for and reacting to changes in our business. |
• | creating a classified board of directors whose members serve staggered three-year terms; |
• | authorizing “blank check” preferred stock, which could be issued by our board without stockholder approval which may contain voting, liquidation, dividend and other rights which are superior to our common stock; |
• | limiting the liability of, and providing indemnification to, our directors and officers; |
• | limiting the ability of our stockholders to call and bring business before special meetings by providing that any stockholder action must be effected at a duly called meeting of the stockholders and not by a consent in writing, and providing that only our board of directors, the chairman of our board of directors, our Chief Executive Officer or President may call a special meeting of the stockholders; and |
• | requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors. |
• | develop or enhance our application and services; |
• | continue to expand our product development, sales and marketing organizations; |
• | acquire complementary technologies, products or businesses; |
• | expand operations, in the United States or internationally; |
• | hire, train and retain employees; or |
• | respond to competitive pressures or unanticipated working capital requirements. |
Exhibit | Incorporated by Reference | Filed | ||||||||||
No. | Exhibit | Form | File No. | Filing Date | Exhibit No. | Herewith | ||||||
31.01 | Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
31.02 | Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
32.01* | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
32.02* | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
* | These exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of Proofpoint, Inc. under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filings. |
PROOFPOINT, INC. | ||
By: | /s/ GARY STEELE | |
Gary Steele Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ PAUL AUVIL | |
Paul Auvil Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ GARY STEELE |
Gary Steele |
Chief Executive Officer |
(Principal Executive Officer) |
/s/ PAUL AUVIL |
Paul Auvil |
Chief Financial Officer |
(Principal Financial Officer) |
• | the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2016 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ GARY STEELE |
Gary Steele |
Chief Executive Officer |
(Principal Executive Officer) |
• | the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2016 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ PAUL AUVIL |
Paul Auvil |
Chief Financial Officer |
(Principal Financial Officer) |
Document and Entity Information Document - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 21, 2016 |
|
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | PROOFPOINT INC. | |
Entity Central Index Key (CIK) | 0001212458 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 42,492,332 |
Condensed Consolidated Balance Sheets Parenthetical - USD ($) shares in Thousands, $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Allowance for doubtful accounts receivable, current | $ 164 | $ 199 |
Preferred Stock, Shares Authorized | 5,000 | 5,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Number of shares of common stock reserved for future issuance | ||
Par value of common stock (USD per share) | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 200,000 | 200,000 |
Common stock issued (in shares) | 42,389 | 40,840 |
Common stock outstanding (in shares) | 42,389 | 40,840 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
||||||
Revenue: | |||||||||
Subscription | $ 97,163 | $ 67,223 | $ 261,878 | $ 184,857 | |||||
Hardware and services | 2,621 | 1,926 | 6,813 | 5,601 | |||||
Revenue, net | 99,784 | 69,149 | 268,691 | 190,458 | |||||
Cost of revenue: | |||||||||
Subscription | 23,987 | 18,209 | 68,867 | 51,372 | |||||
Hardware and services | 3,293 | 2,845 | 9,895 | 8,794 | |||||
Total cost of revenue | [1],[2] | 27,280 | 21,054 | 78,762 | 60,166 | ||||
Gross profit | 72,504 | 48,095 | 189,929 | 130,292 | |||||
Operating expense: | |||||||||
Research and development | 24,493 | 20,000 | 70,734 | 54,367 | |||||
Selling and Marketing Expense | 51,467 | 38,651 | 146,654 | 107,240 | |||||
General and administrative | 8,393 | 9,961 | 41,996 | 25,789 | |||||
Total operating expense | [1],[2] | 84,353 | 68,612 | 259,384 | 187,396 | ||||
Operating loss | (11,849) | (20,517) | (69,455) | (57,104) | |||||
Interest expense | (5,920) | (5,903) | (17,529) | (12,088) | |||||
Other income (expense), net | (228) | (375) | (528) | (1,635) | |||||
Loss before (provision for) benefit from income taxes | (17,997) | (26,795) | (87,512) | (70,827) | |||||
(Provision for) benefit from income taxes | (370) | (219) | (812) | (493) | |||||
Total Net loss | $ (18,367) | $ (27,014) | $ (88,324) | $ (71,320) | |||||
Earnings Per Share, Basic and Diluted | $ (0.44) | $ (0.67) | $ (2.12) | $ (1.80) | |||||
Weighted Average Number of Shares Outstanding, Basic and Diluted | 42,109 | 40,072 | 41,604 | 39,536 | |||||
Intangible amortization expense | $ 3,667 | $ 3,210 | $ 10,441 | $ 8,834 | |||||
Cost of subscription revenue [Member] | |||||||||
Operating expense: | |||||||||
Stock-based Compensation Expense | 2,080 | 1,357 | 5,439 | 3,620 | |||||
Intangible amortization expense | 2,223 | 1,945 | 6,458 | 4,914 | |||||
Cost of hardware and services revenue [Member] | |||||||||
Operating expense: | |||||||||
Stock-based Compensation Expense | 375 | 270 | 1,120 | 774 | |||||
Research and development [Member] | |||||||||
Operating expense: | |||||||||
Stock-based Compensation Expense | 6,019 | 5,862 | 17,498 | 15,562 | |||||
Intangible amortization expense | 15 | 23 | 45 | 69 | |||||
Sales and marketing [Member] | |||||||||
Operating expense: | |||||||||
Stock-based Compensation Expense | 7,174 | 5,469 | 20,710 | 15,495 | |||||
Intangible amortization expense | 1,429 | 1,242 | 3,938 | 3,839 | |||||
General and administrative [Member] | |||||||||
Operating expense: | |||||||||
Stock-based Compensation Expense | 4,315 | 3,238 | 12,387 | 8,406 | |||||
Intangible amortization expense | $ 0 | $ 0 | $ 0 | $ 12 | |||||
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Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Total Net loss | $ (18,367) | $ (27,014) | $ (88,324) | $ (71,320) |
Other comprehensive Income (loss), net of tax | ||||
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax | (8) | (5) | 13 | 20 |
Comprehensive loss | $ (18,375) | $ (27,019) | $ (88,311) | $ (71,300) |
The Company and Summary of Significant Accounting Policies (Notes) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company and Summary of Significant Accounting Policies | The Company and Summary of Significant Accounting Policies The Company Proofpoint, Inc. (the “Company”) was incorporated in Delaware in June 2002 and is headquartered in California. Proofpoint, Inc. is a leading security-as-a-service provider that enables large and mid-sized organizations worldwide to defend, protect, archive and govern their most sensitive data. The Company's security-as-a-service platform is comprised of an integrated suite of on-demand data protection solutions, including threat protection, incident response, regulatory compliance, archiving, governance, eDiscovery, and secure communication. Basis of Presentation and Consolidation These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated in consolidation. Starting January 1, 2016, the Company began separately presenting the effect of exchange rate changes on cash and cash equivalents in its condensed consolidated statements of cash flows due to growing operations in foreign currency environments. Amounts in the comparable prior period have been reclassified to conform to the current period presentation. The Company acquired one business in the three months ended September 30, 2016, and completed a number of acquisitions during the year ended December 31, 2015. These acquisitions are more fully described in Note 2, "Acquisitions". The condensed consolidated financial statements include the results of operations from these business combinations from their date of acquisition. These condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures have been condensed or omitted pursuant to such rules and regulations. The accompanying Condensed Consolidated Balance Sheet as of December 31, 2015 is derived from audited financial statements as of that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the periods presented. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for other interim periods or for future years. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2015 included in the Company’s Annual Report on Form 10-K filed with the SEC. The Company’s significant accounting policies are described in Note 1 to those audited consolidated financial statements. Refer to "Sales Commissions" below regarding the Company's change in accounting policy for sales commissions effective January 1, 2016. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates and such difference may be material to the financial statements. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price of the acquired enterprise over the fair value of identifiable assets acquired and liabilities assumed. The Company performs an annual goodwill impairment test during the fourth quarter of a calendar year and more frequently if an event or circumstances indicates that impairment may have occurred. For the purposes of impairment testing, the Company has determined that it has one operating segment and one reporting unit. The Company performs a two-step impairment test of goodwill whereby the fair value of the reporting unit is compared to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and further testing is not required. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then impairment loss equal to the difference is recorded. The identification and measurement of goodwill impairment involves the estimation of the fair value of the Company. The estimate of fair value of the Company, based on the best information available as of the date of the assessment, is subjective and requires judgment, including management assumptions about expected future revenue forecasts and discount rates, changes in the overall economy, trends in the stock price and other factors. No impairment indicators were identified by the Company as of September 30, 2016. Intangible assets consist of developed technology, customer relationships, non-compete arrangements, trademarks and patents and order backlog. The values assigned to intangibles are based on estimates and judgments regarding expectations for success and life cycle of solutions and technologies acquired. Intangible assets are amortized on a straight-line basis over their estimated lives, which approximate the pattern in which the economic benefits of the intangible assets are consumed, as follows (in years):
Revenue Recognition The Company derives its revenue primarily from two sources: (1) subscription revenue for rights related to the use of the security-as-a-service platform and (2) hardware, training and professional services revenue provided to customers related to their use of the platform. The Company records its revenues net of any value added or sales tax. Subscription revenue is derived from a subscription‑based enterprise licensing model with contract terms typically ranging from one to three years, and consists of (i) subscription fees from the licensing of the security-as-a-service platform, (ii) subscription fees for access to the on-demand elements of the platform and (iii) subscription fees for the right to access the Company’s customer support services. Revenue is recognized when all of the following criteria have been met:
The Company generates sales directly through its sales team and, to a growing extent, through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted price once all revenue recognition criteria are met. Channel partners generally receive an order from an end-customer prior to placing an order with the Company, and these partners do not carry any inventory of the Company's products or solutions. Payment from channel partners is not contingent on the partner’s success in sales to end-customers. In the event that the Company offers rebates, joint marketing funds, or other incentive programs to a partner, recorded revenues are reduced by these amounts accordingly. From time to time, certain third parties that the Company has an arrangement with provide the Company with referrals for which the Company pays a referral fee. The referral fee paid could vary depending on the level of effort. These fees are recorded in sales and marketing expense in proportion to the related revenue streams consistent with the sales commissions accounting. The Company did not incur any material referral fee expenses during the three and nine months ended September 30, 2016 and 2015. The Company applies industry-specific software revenue recognition guidance to transactions involving the licensing of software, as well as related support, training, and other professional services. The Company has analyzed all of the elements included in its multiple element software arrangements and has determined that it does not have sufficient VSOE of fair value to allocate revenue to its subscription and software license agreements, support, training and professional services. The Company defers all revenue under the software arrangement until the commencement of the subscription services and any associated professional services. Once the subscription services and the associated professional services have commenced, the entire fee from the arrangement is recognized ratably over the remaining period of the arrangement. If the professional services are essential to the functionality of the subscription, then the revenue recognition does not commence until such services are completed. The Company's revenue arrangements typically include subscription services to its security-as-a-service platform. These hosted on demand service arrangements do not provide customers with the right to take possession of the software supporting the hosted services. Certain arrangements also include the sale of hardware appliances. Revenue from hardware appliances containing software components and hardware components that function together to deliver the hardware appliance's essential functionality is excluded from the scope of the industry specific revenue recognition guidance. The Company recognizes revenue from its hosted on demand services in accordance with general revenue recognition accounting guidance. Only revenue derived from the licensing of the software is recognized in accordance with the industry specific revenue guidance. When a sales arrangement contains multiple elements, such as hardware appliances, subscription services, customer support services, and/or professional services, the Company allocates revenue to each unit of accounting or element based on a selling price hierarchy. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within the Company's control. When applying the relative selling price method, the Company determines the selling price for each deliverable using vendor-specific objective evidence (“VSOE”) of selling price. If VSOE does not exist, the Company uses third-party evidence (“TPE”) of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, the Company uses its best estimate of selling price ("BESP") for that deliverable. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element. The Company determines BESP for an individual element within a multiple element revenue arrangement using the same methods utilized to determine the selling price of an element sold on a standalone basis. The Company estimates the selling price for its subscription solutions by considering internal factors such as historical pricing practices and it estimates the selling price of hardware and other services using a cost plus model. Hardware appliance revenue is recognized upon shipment. Subscription and support revenue are recognized over the contract period commencing on the start date of the contract. Professional services and training, when sold with hardware appliances or subscription and support services, are accounted for separately when those services have standalone value. In determining whether professional services and training services can be accounted for separately from subscription and support services, the Company considers the following factors: availability of the services from other vendors, the nature of the services, and the dependence of the subscription services on the customer’s decision to buy the professional services. If professional services and training do not qualify for separate accounting, the Company recognizes the professional services and training ratably over the contract term of the subscription services. Delivery generally occurs when the hardware appliance is delivered to a common carrier freight on board shipping point by the Company or the hosted service has been activated and communicated to the customer accordingly. The Company’s fees are typically considered to be fixed or determinable at the inception of an arrangement and are negotiated at the outset of an arrangement, generally based on specific products and quantities to be delivered. In the event payment terms are provided that differ significantly from the Company's standard business practices, the fees are deemed to not be fixed or determinable and revenue is recognized as the fees become paid. The Company assesses collectability based on a number of factors, including credit worthiness of the customer and past transaction history of the customer. Through September 30, 2016, the Company has not experienced significant credit losses. Deferred Revenue Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from the sale of the Company’s subscription fees, training and professional services. Once the revenue recognition criteria are met, this revenue is recognized ratably over the term of the associated contract. Comprehensive Loss Comprehensive loss includes all changes in equity that are not the result of transactions with stockholders. The Company’s comprehensive loss consists of its net loss and changes in unrealized gains (losses) from its available-for-sale investments. The Company had no material reclassifications out of accumulated other comprehensive loss into net loss for the three and nine months ended September 30, 2016 and 2015. Sales Commissions Effective January 1, 2016, the Company changed its accounting policy for sales commissions that are incremental and directly related to its customer sales contracts in which revenue is deferred. These commission costs are accrued and capitalized upon execution of a non-cancelable customer contract, and subsequently expensed over the term of such contract in proportion to the related future revenue streams. For commission costs where revenue is recognized, the related commission costs are recorded in the period of revenue recognition. Prior to this change in accounting policy, commission costs were expensed in the period in which they were incurred. The adoption of this accounting policy change has been applied retrospectively to all periods presented in this Quarterly Report on Form 10-Q, in which the cumulative effect of the change has been reflected as of the beginning of the first period presented. Deferred commissions as of September 30, 2016 and December 31, 2015 were $22,435 and $22,802, respectively. During the three and nine months ended September 30, 2016, the Company deferred $8,857 and $23,895 of commission costs and amortized $8,602 and $24,262 within sales and marketing expense, respectively. During the three and nine months ended September 30, 2015, the Company deferred $7,243 and $19,134 of commission costs and amortized $5,824 and $15,375 within sales and marketing expense, respectively. The Company believes this change in accounting policy is preferable as the direct and incremental commission costs are closely related to the revenue, and therefore they should be recorded as an asset and recognized as an expense over the same period that the related revenue is recognized. The cumulative effect of the change on accumulated deficit was $15,060 as of December 31, 2014. The following tables present the changes to the financial statement lines as a result of the accounting change for the periods presented in the accompanying unaudited Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheet
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Comprehensive Loss
There have been no changes, other than as discussed above, in the Company's significant accounting policies for the nine months ended September 30, 2016, as compared to the significant accounting policies described in the Company's Annual Form 10-K for the year ended December 31, 2015. Recent Accounting Pronouncements In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 makes eight targeted changes how cash receipts and cash payments are presented and classified in the statement of cash flows. The update to the standard is effective for interim and annual periods beginning after December 15, 2017, and requires adoption on a retrospective transition method unless it is impracticable to apply. The Company is currently evaluating the impact of the adoption of ASU 2016-15 on its consolidated financial statements. In June 2016, FASB issued an Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 changes the impairment model for most financial assets, and will require the use of an expected loss model in place of the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The update to the standard is effective for interim and annual periods beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements. In March 2016, FASB issued Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for interim and annual periods beginning after December 15, 2016. The Company is currently evaluating the impact of the adoption of ASU 2016-09 on its consolidated financial statements. In February 2016, FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which requires lessees to put most leases on their balance sheets but recognize the expenses on their statements of operations in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The new standard is effective for interim and annual periods beginning after December 15, 2018 and early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Originally, ASU 2014-09 would be effective for the Company starting January 1, 2017 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. In July 2015, the FASB voted to amend ASU 2014-09 by approving a one-year deferral of the effective date as well as providing the option to early adopt the standard on the original effective date. The FASB has issued several updates to the standard which i) clarify the application of the principal versus agent guidance (ASU 2016-08); ii) clarify the guidance on inconsequential and perfunctory promises and licensing (ASU 2016-10) and iii) narrow-scope improvements and practical expedients (ASU 2016-12). The Company is currently evaluating the timing, transition method and impact of the adoption of the standard on its consolidated financial statements. |
Acquisitions (Notes) |
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Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination Disclosure [Text Block] | Acquisitions Acquisitions are accounted for under the purchase method of accounting in which the tangible and identifiable intangible assets and liabilities of each acquired company are recorded at their respective fair values as of each acquisition date, including an amount for goodwill representing the difference between the respective acquisition consideration and fair values of identifiable net assets. The Company believes that for each acquisition, the combined entities will achieve savings in corporate overhead costs and opportunities for growth through expanded geographic and customer segment diversity with the ability to leverage additional products and capabilities. These factors, among others, contributed to a purchase price in excess of the estimated fair value of each acquired company's net identifiable assets acquired and, as a result, goodwill was recorded in connection with each acquisition. Goodwill related to each acquisition below, except for one of the acquisitions made in the fourth quarter of 2015, is deductible for tax purposes. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date, these estimates and assumptions are subject to refinement. When additional information becomes available, such as finalization of negotiations of working capital adjustments and tax related matters, the Company may revise its preliminary purchase price allocation. As a result, during the preliminary purchase price allocation period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Subsequent to the purchase price allocation period, adjustments to assets acquired or liabilities assumed are recognized in the operating results. Return Path On August 24, 2016 (the "Return Path Acquisition Date"), pursuant to the terms of an asset purchase agreement, the Company acquired Return Path, Inc.'s ("Return Path") Email Fraud Protection ("EFP") business unit. Return Path's EFP business, which provides standards-based DMARC authentication and proprietary sender-analysis capabilities, will be integrated into the Company's suite of email protection solutions to further enhance its business email compromise capabilities. The Company has provisionally estimated fair values of acquired tangible assets, intangible assets and liabilities at the Return Path Acquisition Date. The amounts reported are considered provisional as the Company is completing the valuation work to determine the fair value of certain assets and liabilities acquired. The results of operations and the provisional fair values of the acquired assets and liabilities assumed have been included in the accompanying condensed consolidated financial statements since the Return Path Acquisition Date. Revenue from Return Path was not material for the three and nine months ended September 30, 2016, and due to the continued integration of the combined businesses, it was impractical to determine the earnings. Pro forma results of operations have not been presented because the acquisition was not material to the Company's results of operations. The total purchase price was $17,513, of which $9,162 was classified and recorded as contingent consideration on the balance sheet as of the Return Path Acquisition Date. The Company expects to pay the contingent consideration within two years depending on the timing of contract assignments following the Return Path acquisition date and the maximum potential payment amount could be up to $9,644. The Company incurred $406 in acquisition related costs which were recorded within operating expenses for the nine months ended September 30, 2016. The fair value of the contingent consideration liability was determined as of the acquisition date using unobservable inputs. These inputs include the estimated amount and timing of future contract assignments, the probability of success and a risk-adjusted discount rate to adjust the probability-weighted cash flows to present value. Fair value of acquired assets The following table summarizes the estimated fair values of acquired assets and liabilities:
2015 Acquisitions In the fourth quarter of the year ended December 31, 2015, the Company made two acquisitions that were accounted for as business combinations. The Company has provisionally estimated fair values of acquired tangible and intangible assets at the respective date of each acquisition. The amounts reported are considered provisional as the Company is completing the valuation work to determine the fair value of certain assets acquired. The results of operations and the provisional fair values of the acquired assets and liabilities assumed have been included in the accompanying condensed consolidated financial statements from the respective date of each acquisition. The aggregate purchase price was $11,568. The following table summarizes the fair values of acquired tangible and intangible assets, liabilities and goodwill:
Marble Security, Inc. On July 22, 2015 (the "Marble Acquisition Date"), pursuant to the terms of an asset purchase agreement, the Company acquired certain assets of Marble Security, Inc. ("Marble"). The Marble mobile security technology proactively removes malicious mobile applications by leveraging its tight integration with the leading enterprise mobility management platforms, including MobileIron and AirWatch by VMware. The acquisition extends the Company’s threat intelligence and advanced threat protection for email and social media security into the realm of mobile devices. The results of operations and the fair values of the acquired assets and liabilities assumed have been included in the accompanying condensed consolidated financial statements since the Marble Acquisition Date. The total purchase price was $8,500. Of the cash consideration paid, $1,700 was held in escrow, to secure indemnification obligations, which has not been released as of the filing date of this Quarterly Report on Form 10-Q. Fair value of acquired assets The following table summarizes the fair values of acquired tangible, intangible assets and goodwill:
Emerging Threats Pro, LLC On March 6, 2015 (the "Emerging Threats Acquisition Date"), pursuant to the terms of a purchase agreement, the Company acquired 100% of membership interests in Emerging Threats Pro, LLC ("Emerging Threats"). Based in Indianapolis, Indiana, Emerging Threats provides threat intelligence solutions to help protect networks from known or potentially malicious threats. With this acquisition, the Company integrated Emerging Threat's advanced threat intelligence solutions with its existing Targeted Attack Protection and Threat Response security solutions to advance threat detection and response across the completed attack chain. The combined technology provides customers with deeper insight into cyberthreats, enabling them to react faster to inbound cyberattacks, and to identify, block, and disable previously undetected malware already embedded in their organizations. The results of operations and the fair values of the acquired assets and liabilities assumed have been included in the accompanying condensed consolidated financial statements since the Emerging Threat Acquisition Date. The total purchase price was $31,803, net of cash acquired of $52, of which $3,662 was paid in the second quarter of 2015. Of the cash consideration paid, $6,000 was held in escrow, to secure indemnification obligations, which has not been released as of the filing date of this Quarterly Report on Form 10-Q. Fair value of acquired assets and liabilities assumed The following table summarizes the fair values of tangible and intangible assets acquired, liabilities assumed and goodwill:
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets The goodwill activity and balances are presented below:
Intangible Assets Intangible assets, excluding goodwill, consisted of the following:
Amortization of intangible assets expense was $3,667 and $3,210 for the three months ended September 30, 2016 and 2015, respectively, and $10,441 and $8,834 for the nine months ended September 30, 2016 and 2015, respectively. Future estimated amortization of intangible assets expense as of September 30, 2016 are presented below:
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Fair Value Measurements and Investments (Notes) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value and Investments Disclosures | Fair Value Measurements and Investments Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. A hierarchy for inputs used in measuring fair value has been defined to minimize the use of unobservable inputs by requiring the use of observable market data when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on active market data. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs into three broad levels:
The Company’s Level 1 assets generally consist of money market funds.
The Company’s Level 2 assets and liabilities generally consist of corporate debt securities, commercial papers, U.S. agency and Treasury securities and convertible senior notes.
In connection with the acquisition of Return Path, a liability was recognized on Return Path Acquisition Date for the estimate of the fair value of the Company's contingent payment. The Company determined the fair value of the Acquisition-related contingent liability based on the estimated amount and timing of future contract assignments, and the probability of success. This fair value measurement is based on significant inputs not observable in the market and thus represent Level 3 measurement. The following tables summarize, for each category of assets or liabilities carried at fair value, the respective fair value as of September 30, 2016 and December 31, 2015 and the classification by level of input within the fair value hierarchy:
$9,162 acquisition-related contingent liability was recorded due to the Return Path acquisition (see Note 2) and there were no other fair value movements for this liability in the nine months ended September 30, 2016. Based on quoted market prices as of September 30, 2016, the fair values of the 0.75% and 1.25% Convertible Senior Notes were approximately $266,103 and $323,171, respectively, determined using Level 2 inputs as they are not actively traded in markets. The carrying amounts of the Company's cash equivalents, accounts receivable and accounts payable approximate their fair values due to their short maturities. Investments The cost and fair value of the Company’s cash and cash equivalents and available-for-sale investments as of September 30, 2016 and December 31, 2015 were as follows:
As of September 30, 2016 and December 31, 2015, all investments mature in less than one year. Estimated fair values for marketable securities are based on quoted market prices for the same or similar instruments. The Company reviews its investments on a quarterly basis to identify and evaluate investments that have an indication of possible impairment and has determined that no other-than-temporary impairments were required to be recognized during three and nine months ended September 30, 2016. |
Commitments and Contingencies (Notes) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Operating Leases The Company leases certain of its facilities under noncancellable operating leases with various expiration dates through 2025. Premises rent expense was $1,197 and $984 for the three months ended September 30, 2016 and 2015, respectively, and $3,595 and $2,802 for the nine months ended September 30, 2016 and 2015, respectively. Capital Leases In July 2012, the Company entered into two lease agreements to lease certain office equipment that expired in July and October 2015. These leases bore an annual interest rate of 4.5%. In July 2015, the Company entered into a new lease agreement (the "July 2015 Lease") to lease certain office equipment with expiration in August 2020. The July 2015 Lease bears an annual interest rate of 6.5%. All leases are secured by fixed assets used in the Company's office locations. At September 30, 2016, future annual minimum lease payments under noncancellable operating and capital leases were as follows:
Contingencies Under the indemnification provisions of the Company's customer agreements, the Company agrees to indemnify and defend and hold harmless its customers against, among other things, infringement of any patent, trademark or copyright under any country's laws or the misappropriation of any trade secret arising from the customers' legal use of the Company's solutions. The exposure to the Company under these indemnification provisions is generally limited to the total amount paid by the customers under the applicable customer agreement. However, certain indemnification provisions potentially expose the Company to losses in excess of the aggregate amount paid to the Company by the customer under the applicable customer agreement. To date, there have been no claims against the Company or its customers pursuant to these indemnification provisions. Legal Contingencies From time to time, the Company may be involved in legal proceedings and subject to claims in the ordinary course of business. On December 16, 2013, Finjan, Inc. sued the Company and its wholly-owned subsidiary, Armorize Technologies, Inc., in the United States District Court, Northern District of California for alleged patent infringement of a variety of its patents, demanding preliminary and permanent injunctive relief, and unspecified damages. On June 3, 2016, the Company executed a Confidential Patent License, Settlement and Release Agreement with Finjan, Inc. The Company evaluated the transaction as a multiple-element arrangement and allocated the payment of $10,900 to each identifiable element using its relative fair value. Based on estimates of fair value, the Company determined that the primary benefit of the arrangement is avoided litigation cost and the release of any potential past claims, with no material value attributable to future use or benefit. Accordingly, the Company recorded a $10,900 settlement charge within general and administrative expense in its consolidated statement of operations in the three months ended June 30, 2016. The settlement charge was reduced by $1,938 received from escrow as part of the Armorize Technologies, Inc. Acquisition Agreement in the three months ended September 30, 2016. The Company paid $4,300 to Finjan, Inc. in June 2016, and will pay $3,300 on or before January 4, 2017, and $3,300 on or before January 3, 2018. The payables were recorded in accounts payable and other-long term liabilities, respectively, on the balance sheet as of September 30, 2016. |
Convertible Senior Notes (Notes) |
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Convertible Senior Notes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Senior Notes | Convertible Senior Notes 0.75% Convertible Senior Notes due June 2020 On June 17, 2015, the Company issued $200,000 principal amount of 0.75% Convertible Senior Notes (the "0.75% Notes") due 2020 in a private offering to qualified institutional buyers ("Holders") pursuant to Rule 144A under the Securities Act of 1934, as amended (the "Securities Act"). The initial Holders of the 0.75% Notes also had an option to purchase an additional $30,000 in principal amount which was exercised in full. The net proceeds after the agent's discount and issuance costs of $6,581 from the 0.75% Notes offering were approximately $223,419. The Company uses the net proceeds for working capital and general corporate purposes, which may include funding the Company's operations, capital expenditures, and potential acquisitions of businesses, products or technologies believed to be of strategic importance. The 0.75% Notes bear interest at 0.75% per year, payable semi-annually in arrears every June 15 and December 15, beginning on December 15, 2015. The 0.75% Notes are unsecured and rank senior in right of payment to any indebtedness expressly subordinated in right of payment to the 0.75% Notes. They rank equally with the Company's other existing and future unsecured indebtedness that is not subordinated and are structurally subordinated to any current or future secured indebtedness to the extent of the value of the assets securing the indebtedness and other liabilities of the Company's subsidiaries. The initial conversion rate is 12.3108 shares of the Company’s common stock per $1 principal amount of notes which equates to 2,831 shares of common stock, or a conversion price equivalent of $81.23 per share of common stock. Throughout the term of the 0.75% Notes, the conversion rate may be adjusted upon the occurrence of certain events, such as the payment of cash dividends or issuance of stock warrants. The 0.75% Notes mature on June 15, 2020, unless repurchased, redeemed or converted in accordance with their terms prior to such date. At the Company's option, on or after June 20, 2018, the Company will be able to redeem all or a portion of the 0.75% Notes at 100% of the principal amount, plus any accrued and unpaid interest, under certain conditions. The Company may redeem the 0.75% Notes in shares of the Company’s common stock, cash, or some combination of each. Prior to December 15, 2019, the 0.75% Notes will be convertible at the option of the Holders only upon the satisfaction of certain conditions and during certain periods if any of the following events occur:
Subsequent to December 15, 2019, Holders may convert their 0.75% Notes at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Holders of the 0.75% Notes also have the right to require the Company to repurchase all or a portion of the 0.75% Notes at 100% of the principal amount, plus accrued and unpaid special interest, if any, upon the occurrence of certain fundamental changes to the Company. In accordance with the authoritative accounting guidance, the Company allocated the total amount of the 0.75% Notes into liability and equity components. The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 6.5% based on the a blended rate between the yield rate for a Moody's B1 rating and the average debt rate for comparable convertible transactions from similar companies. The difference between the 0.75% Notes principal and the carrying value of the liability component, representing the value of conversion premium assigned to the equity component, was recorded as an increase to additional paid in capital and as a debt discount on the issuance date. The equity component is being accreted using the effective interest rate method over the period from the issuance date through June 15, 2020 as a non-cash charge to interest expense. The amount recorded to additional paid in capital is not remeasured as long as it continues to meet the conditions for equity classification. Upon issuance of the 0.75% Notes, the Company recorded $174,359 as debt and $55,641 as additional paid in capital within stockholders' equity. Additionally, the debt discount and issuance costs were allocated based on the total amount incurred to the liability and equity components using the same proportions as the proceeds from the 0.75% Notes. The equity issuance costs of $1,592 were recorded as a decrease to additional paid-in capital at the issuance date. 1.25% Convertible Senior Notes due December 2018 On December 11, 2013, the Company issued $175,000 principal amount of 1.25% Convertible Senior Notes (the "1.25% Notes," and together with the 0.75% Notes, the “Notes”) due 2018 in a private offering to Holders pursuant to Rule 144A under the Securities Act. The initial Holders of the 1.25% Notes also had an option to purchase an additional $26,250 in principal amount which was exercised in full. The net proceeds after the agent's discount and issuance costs of $5,803 from the 1.25% Notes offering were approximately $195,446. The Company uses the net proceeds for working capital and general corporate purposes, which may include funding the Company's operations, capital expenditures, and potential acquisitions of businesses, products or technologies believed to be of strategic importance. The 1.25% Notes bear interest at 1.25% per year, payable semi-annually in arrears every June 15 and December 15, beginning on June 15, 2014. On July 5, 2016, the Company and the Trustee executed a supplemental indenture to address an administrative issue with the timing of a redemption notice. The amendment did not adversely affect the right of any holder and therefore did not require their consent. The 1.25% Notes are unsecured and rank senior in right of payment to any indebtedness expressly subordinated in right of payment to the 1.25% Notes. They rank equally with the Company's other existing and future unsecured indebtedness that is not subordinated and are structurally subordinated to any current or future secured indebtedness to the extent of the value of the assets securing the indebtedness and other liabilities of the Company's subsidiaries. The initial conversion rate is 25.6271 shares of the Company’s common stock per $1 principal amount of notes which equates to 5,158 shares of common stock, or a conversion price equivalent of $39.02 per share of common stock. Throughout the term of the 1.25% Notes, the conversion rate may be adjusted upon the occurrence of certain events, such as the payment of cash dividends or issuance of stock warrants. The 1.25% Notes mature on December 15, 2018, unless repurchased, redeemed or converted in accordance with their terms prior to such date. At the Company's option, on or after December 20, 2016, the Company will be able to redeem all or a portion of the 1.25% Notes at 100% of the principal amount, plus any accrued and unpaid interest, under certain conditions. The Company may redeem the 1.25% Notes in shares of the Company’s common stock, cash, or some combination of each. Prior to June 15, 2018, the 1.25% Notes will be convertible at the option of the Holders only upon the satisfaction of certain conditions and during certain periods if any of the following events occur:
Subsequent to June 15, 2018, Holders may convert their 1.25% Notes at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Holders of the 1.25% Notes also have the right to require the Company to repurchase all or a portion of the 1.25% Notes at 100% of the principal amount, plus accrued and unpaid special interest, if any, upon the occurrence of certain fundamental changes to the Company. In accordance with the authoritative accounting guidance, the Company allocated the total amount of the 1.25% Notes into liability and equity components. The carrying value of the liability component at issuance was calculated as the present value of its cash flows using a discount rate of 6.5% based on the a blended rate between the yield rate for a Moody's B1-rating and the average debt rate for comparable convertible transactions from similar companies. The difference between the 1.25% Notes principal and the carrying value of the liability component, representing the value of conversion premium assigned to the equity component, was recorded as an increase to additional paid in capital and as a debt discount on the issuance date. The equity component is being accreted using the effective interest rate method over the period from the issuance date through December 15, 2018 as a non-cash charge to interest expense. The amount recorded to additional paid in capital is not remeasured as long as it continues to meet the conditions for equity classification. Upon issuance of the 1.25% Notes, the Company recorded $156,672 as debt and $44,578 as additional paid in capital within stockholders' equity. Additionally, the discount and issuance costs were allocated based on the total amount incurred to the liability and equity components using the same proportions as the proceeds from the 1.25% Notes. The equity issuance costs of $1,285 were recorded as a decrease to additional paid-in capital at the issuance date. The following tables presents the carrying values of all Notes as of September 30, 2016 and December 31, 2015:
(1) Recorded on the accompanying Condensed Consolidated Balance Sheets as additional paid-in capital, net of the $2,877 issuance costs. For the three and nine months ended September 30, 2016 and 2015, the Company incurred the following interest expense related to the Notes:
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Stock Equity Plans (Notes) |
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Equity Incentive Plans Held [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Equity Plans | Stock Equity Plans Stock-Based Compensation Plans On March 30, 2012, the Board of Directors and the Company’s stockholders approved the 2012 Equity Incentive Plan (the "2012 Plan"), which became effective in April 2012. The Company has two equity incentive plans: the Company’s 2002 stock option plan (the “2002 Plan”) and the 2012 Plan. Upon the Company's initial public offering, all shares that were reserved under the 2002 Plan but not issued, and shares issued but subsequently returned to the plan through forfeitures, cancellations and repurchases became part of the 2012 Plan and no further shares will be granted pursuant to the 2002 Plan. All outstanding stock awards under the 2002 and 2012 Plans will continue to be governed by their existing terms. Under the 2012 Plan, the Company has the ability to issue incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), restricted stock awards, stock bonus awards, stock appreciation rights ("SARs"), restricted stock units ("RSUs"), and performance stock units ("PSUs"). The 2012 Plan also allows direct issuance of common stock to employees, outside directors and consultants at prices equal to the fair market value at the date of grant of options or issuance of common stock. Additionally, the 2012 Plan provides for the grant of performance cash awards to employees, directors and consultants. The Company has the right to repurchase any unvested shares (at the option exercise price) of common stock issued directly or under option exercises. The right of repurchase generally expires over the vesting period. Stock bonus and other liability awards are accounted for as liability-classified awards, because the obligations are based predominantly on fixed monetary amounts that are generally known at the inception of the obligation, to be settled with a variable number of shares of the Company's common stock. Under the 2002 and 2012 Plans, the term of an option grant shall not exceed ten years from the date of its grant and options generally vest over a three to four-year period, with vesting on a monthly or annual interval. Under the 2012 Plan, 20,316 shares of common stock are reserved for issuance to eligible participants. As of September 30, 2016, 6,463 shares were available for future grant. Restricted stock awards generally vest over a four-year period. Stock Options The fair value of options granted is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock-based compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term (weighted-average period of time that the options granted are expected to be outstanding), the volatility of the common stock price and the assumed risk-free interest rate. The Company recognizes stock-based compensation expense for only those shares expected to vest over the requisite service period of the award. The Company determines its estimated forfeiture rate based on an analysis of its actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on recent forfeiture activity and expected future employee turnover, if any. Changes in the estimated forfeiture rate can have a significant effect on reported stock-based compensation expense, as the cumulative effect of adjusting the rate for all expense is recognized in the period the forfeiture estimate is changed. No compensation cost is recorded for options that do not vest and the compensation cost from vested options, whether forfeited or not, is not reversed. The weighted average fair value of stock options granted to employees was $34.35 and $24.04 per share during the three and nine months ended September 30, 2016, respectively, and $32.27 and $28.20 per share during the three and nine months ended September 30, 2015, respectively. The fair values were estimated on the grant dates using the Black-Scholes option-pricing model with the following weighted-average assumptions:
The estimate for expected life of options granted reflects the midpoint of the vesting term and the contractual life computed utilizing the simplified method as allowed by the SEC staff. The Company does not have significant historical share option exercise experience and hence considers the expected term assumption calculated using the simplified method to be reasonable. Starting January 1, 2016, the expected volatility of the Company's common stock is based on the Company's historical volatility. Prior to January 1, 2016, the common stock price volatility was determined based on the historical average volatilities of the common stock of a group of publicly-traded peer companies that operate in a similar industry as the Company did not have sufficient trading history for its common stock. The risk-free interest rate used was the Federal Reserve Bank's constant maturities interest rate commensurate with the expected life of the options in effect at the time of the grant. The expected dividend yield was zero, as the Company does not anticipate paying a dividend within the relevant time frame. The Company realized no income tax benefit from stock option exercises in each of the periods presented due to recurring losses and the valuation allowances for deferred tax assets. Stock option activity under the Plan is as follows:
The total intrinsic value of options exercised was $43,980 and $57,137 for the nine months ended September 30, 2016 and 2015, respectively. Total cash proceeds from such option exercises were $10,655 and $8,693 for the nine months ended September 30, 2016 and 2015, respectively. The fair value of option grants that vested was $7,364 and $9,520 for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016, the Company had unamortized stock-based compensation expense of $12,549 related to stock options, that will be recognized net of forfeitures over the average remaining vesting term of the options of 2.10 years. Restricted Stock and Performance Stock Units A following table summarized the activity of RSUs and PSUs:
As of September 30, 2016, there was $99,843 of unamortized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted average period of 2.91 years. The Company granted 146 and 186 PSUs in the nine months ended September 30, 2016 and 2015, respectively. The PSU vesting conditions were based on individual performance targets. Unamortized expense was $10,809 as of September 30, 2016, net of estimated forfeitures. Stock Bonus and Other Liability Awards The total accrued liability for the stock bonus awards was $4,494 and $5,676 as of September 30, 2016 and December 31, 2015, respectively. During the nine months ended September 30, 2016 and 2015, 93 and 30 shares, respectively, of common stock earned under the stock bonus program were issued. Stock based compensation expense related to stock bonus program was $4,364 and $2,817 for the nine months ended September 30, 2016 and 2015, respectively. In March 2015, the Company issued liability awards with a fair value of $6,885, which vest annually over a three-year period and are subject to continuous service and other conditions. The liability awards will be settled with a variable number of shares of the Company's common stock. During the nine months ended September 30, 2016, 45 shares were vested and issued. The Company recognized $1,721 and $1,307 of stock-based compensation expense related to these liability awards for the nine months ended September 30, 2016 and 2015, respectively. Employee Stock Purchase Plan On March 30, 2012, the Board of Directors and the Company’s stockholders approved the 2012 Employee Stock Purchase Plan (the "ESPP"), which became effective in April 2012. A total of 745 shares of the Company's common stock were initially reserved for future issuance under the ESPP. The number of shares reserved for issuance under the ESPP will increase automatically on January 1 of each of the first eight years commencing with 2013 by the number of shares equal to 1% of the Company's shares outstanding on the immediately preceding December 31, but not to exceed 1,490 shares, unless the Board of Directors, in its discretion, determines to make a smaller increase. As of September 30, 2016, there were 1,459 shares of the Company's common stock available for future issuance under the ESPP. As of September 30, 2016, the Company expects to recognize $400 of the total unamortized compensation cost related to employee purchases under the ESPP over a weighted average period of 0.1 years. Restricted Stock The Company granted 54 shares of restricted stock in the fourth quarter of 2014 to certain key employees with the total fair value of $2,357 and two-year cliff vesting in 2016. The Company recognized $884 of stock based compensation expense in each of the nine month periods ended September 30, 2016 and 2015. As of September 30, 2016, there was $98 of unamortized stock-based compensation expense related to the unvested shares of restricted stock. The shares of restricted stock are subject to forfeiture if employment terminates prior to the lapse of the restrictions, and are expensed over the vesting period. They are considered issued and outstanding shares of the Company at the grant date and have the same rights as other shares of common stock. |
Net Loss per Share (Notes) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss per Share | Net Loss per Share Basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. The weighted-average number of shares of common stock used to calculate basic net loss per share of common stock excludes those shares subject to repurchase related to stock options or restricted stock that were exercised or issued prior to vesting as these shares are not deemed to be issued for accounting purposes until they vest. Diluted net loss per share of common stock is computed by dividing the net loss using the weighted-average number of shares of common stock, excluding common stock subject to repurchase, and, if dilutive, potential shares of common stock outstanding during the period. Basic and diluted net loss per common share was the same for all periods presented as the impact of all potentially dilutive securities outstanding was anti-dilutive. The following table presents the potentially dilutive common shares outstanding that were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:
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Segment Reporting (Notes) |
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Segment Reporting | Segment Reporting Operating segments are reported in a manner consistent with the internal reporting supported and defined by the components of an enterprise about which separate financial information is available, provided and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis. The Company has one business activity, and there are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Accordingly, the Company determined that it has one operating and reportable segment. Starting January 1, 2016, the Company included privacy solutions into the "Archiving, Privacy and Governance" group. Amounts in the comparable prior period have been reclassified to conform to the current presentation. The following sets forth total revenue by solutions offered by the Company and by geographic area. Revenue by geographic area is based upon the billing address of the customer:
Long-lived assets by geographic area are presented below:
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Income Taxes (Notes) |
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Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company’s quarterly provision for income taxes is based on an estimated effective annual income tax rate. The Company’s quarterly provision for income taxes also includes the tax impact of certain unusual or infrequently occurring items, if any, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. Income tax expense for the three and nine months ended September 30, 2016 was $370 and $812 on pre-tax losses of $17,997 and $87,512, respectively. The Company recognized income tax expense of $219 and $493 for the three and nine months ended September 30, 2015 on pre-tax losses of $26,795 and $70,827, respectively. The income tax rate for the three and nine months ended September 30, 2016 and 2015 varies from the United States statutory income tax rate primarily due to valuation allowances in the United States whereby pre-tax losses and income do not result in the recognition of corresponding income tax benefits and expenses. The Company's effective tax rate for the nine months ended September 30, 2016 and 2015 was negative 0.9% and negative 0.7%, respectively. The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and, therefore, the need for valuation allowances, on a quarterly basis. There is no corresponding income tax benefit recognized with respect to losses incurred and no corresponding income tax expense recognized with respect to earnings generated in jurisdictions with a valuation allowance. This causes variability in the Company’s effective tax rate. The Company intends to maintain the valuation allowances until it is more likely than not that the net deferred tax assets will be realized. As of September 30, 2016, the Company's gross uncertain tax benefits totaled $5,528, excluding related accrued interest and penalties of $239. As of September 30, 2016, $1,152 of the Company's uncertain tax benefits, including related accrued interest and penalties, would affect the effective tax rate if recognized. During the nine months ended September 30, 2016, the Company's gross uncertain tax benefits increased $213. The increase is comprised of a $257 increase for tax positions taken in the current period, offset by a $9 decrease for tax positions taken in prior periods, and a $35 decrease related to statute of limitation expirations. The Company is not currently under audit by the IRS or any similar taxing authority in any other material jurisdiction. The Company believes it has recorded all appropriate provisions for all jurisdictions and open years. However, the Company can give no assurance that taxing authorities will not propose adjustments that would increase its tax liabilities. |
Subsequent events (Notes) |
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Subsequent Event [Line Items] | |
Subsequent Events [Text Block] | Subsequent Events In October 2016, the Company acquired FireLayers Ltd. for a purchase price of approximately $55,000. FireLayers Ltd. offers cloud-based security services, which will extend the Company's Targeted Attack Protection to SaaS applications enabling customers to protect their employees using SaaS applications from advanced malware. Management is currently in process of valuing the assets acquired and liabilities assumed associated with the acquisition. |
The Company and Summary of Significant Accounting Policies (Policies) |
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Basis of Presentation and Consolidation | Basis of Presentation and Consolidation These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated in consolidation. Starting January 1, 2016, the Company began separately presenting the effect of exchange rate changes on cash and cash equivalents in its condensed consolidated statements of cash flows due to growing operations in foreign currency environments. Amounts in the comparable prior period have been reclassified to conform to the current period presentation. The Company acquired one business in the three months ended September 30, 2016, and completed a number of acquisitions during the year ended December 31, 2015. These acquisitions are more fully described in Note 2, "Acquisitions". The condensed consolidated financial statements include the results of operations from these business combinations from their date of acquisition. These condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures have been condensed or omitted pursuant to such rules and regulations. The accompanying Condensed Consolidated Balance Sheet as of December 31, 2015 is derived from audited financial statements as of that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the periods presented. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or for other interim periods or for future years. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2015 included in the Company’s Annual Report on Form 10-K filed with the SEC. The Company’s significant accounting policies are described in Note 1 to those audited consolidated financial statements. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates and such difference may be material to the financial statements. |
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Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill represents the excess of the purchase price of the acquired enterprise over the fair value of identifiable assets acquired and liabilities assumed. The Company performs an annual goodwill impairment test during the fourth quarter of a calendar year and more frequently if an event or circumstances indicates that impairment may have occurred. For the purposes of impairment testing, the Company has determined that it has one operating segment and one reporting unit. The Company performs a two-step impairment test of goodwill whereby the fair value of the reporting unit is compared to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and further testing is not required. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then impairment loss equal to the difference is recorded. The identification and measurement of goodwill impairment involves the estimation of the fair value of the Company. The estimate of fair value of the Company, based on the best information available as of the date of the assessment, is subjective and requires judgment, including management assumptions about expected future revenue forecasts and discount rates, changes in the overall economy, trends in the stock price and other factors. No impairment indicators were identified by the Company as of September 30, 2016. Intangible assets consist of developed technology, customer relationships, non-compete arrangements, trademarks and patents and order backlog. The values assigned to intangibles are based on estimates and judgments regarding expectations for success and life cycle of solutions and technologies acquired. Intangible assets are amortized on a straight-line basis over their estimated lives, which approximate the pattern in which the economic benefits of the intangible assets are consumed, as follows (in years):
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Revenue Recognition | Revenue Recognition The Company derives its revenue primarily from two sources: (1) subscription revenue for rights related to the use of the security-as-a-service platform and (2) hardware, training and professional services revenue provided to customers related to their use of the platform. The Company records its revenues net of any value added or sales tax. Subscription revenue is derived from a subscription‑based enterprise licensing model with contract terms typically ranging from one to three years, and consists of (i) subscription fees from the licensing of the security-as-a-service platform, (ii) subscription fees for access to the on-demand elements of the platform and (iii) subscription fees for the right to access the Company’s customer support services. Revenue is recognized when all of the following criteria have been met:
The Company generates sales directly through its sales team and, to a growing extent, through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted price once all revenue recognition criteria are met. Channel partners generally receive an order from an end-customer prior to placing an order with the Company, and these partners do not carry any inventory of the Company's products or solutions. Payment from channel partners is not contingent on the partner’s success in sales to end-customers. In the event that the Company offers rebates, joint marketing funds, or other incentive programs to a partner, recorded revenues are reduced by these amounts accordingly. From time to time, certain third parties that the Company has an arrangement with provide the Company with referrals for which the Company pays a referral fee. The referral fee paid could vary depending on the level of effort. These fees are recorded in sales and marketing expense in proportion to the related revenue streams consistent with the sales commissions accounting. The Company did not incur any material referral fee expenses during the three and nine months ended September 30, 2016 and 2015. The Company applies industry-specific software revenue recognition guidance to transactions involving the licensing of software, as well as related support, training, and other professional services. The Company has analyzed all of the elements included in its multiple element software arrangements and has determined that it does not have sufficient VSOE of fair value to allocate revenue to its subscription and software license agreements, support, training and professional services. The Company defers all revenue under the software arrangement until the commencement of the subscription services and any associated professional services. Once the subscription services and the associated professional services have commenced, the entire fee from the arrangement is recognized ratably over the remaining period of the arrangement. If the professional services are essential to the functionality of the subscription, then the revenue recognition does not commence until such services are completed. The Company's revenue arrangements typically include subscription services to its security-as-a-service platform. These hosted on demand service arrangements do not provide customers with the right to take possession of the software supporting the hosted services. Certain arrangements also include the sale of hardware appliances. Revenue from hardware appliances containing software components and hardware components that function together to deliver the hardware appliance's essential functionality is excluded from the scope of the industry specific revenue recognition guidance. The Company recognizes revenue from its hosted on demand services in accordance with general revenue recognition accounting guidance. Only revenue derived from the licensing of the software is recognized in accordance with the industry specific revenue guidance. When a sales arrangement contains multiple elements, such as hardware appliances, subscription services, customer support services, and/or professional services, the Company allocates revenue to each unit of accounting or element based on a selling price hierarchy. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within the Company's control. When applying the relative selling price method, the Company determines the selling price for each deliverable using vendor-specific objective evidence (“VSOE”) of selling price. If VSOE does not exist, the Company uses third-party evidence (“TPE”) of selling price. If neither VSOE nor TPE of selling price exist for a deliverable, the Company uses its best estimate of selling price ("BESP") for that deliverable. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element. The Company determines BESP for an individual element within a multiple element revenue arrangement using the same methods utilized to determine the selling price of an element sold on a standalone basis. The Company estimates the selling price for its subscription solutions by considering internal factors such as historical pricing practices and it estimates the selling price of hardware and other services using a cost plus model. Hardware appliance revenue is recognized upon shipment. Subscription and support revenue are recognized over the contract period commencing on the start date of the contract. Professional services and training, when sold with hardware appliances or subscription and support services, are accounted for separately when those services have standalone value. In determining whether professional services and training services can be accounted for separately from subscription and support services, the Company considers the following factors: availability of the services from other vendors, the nature of the services, and the dependence of the subscription services on the customer’s decision to buy the professional services. If professional services and training do not qualify for separate accounting, the Company recognizes the professional services and training ratably over the contract term of the subscription services. Delivery generally occurs when the hardware appliance is delivered to a common carrier freight on board shipping point by the Company or the hosted service has been activated and communicated to the customer accordingly. The Company’s fees are typically considered to be fixed or determinable at the inception of an arrangement and are negotiated at the outset of an arrangement, generally based on specific products and quantities to be delivered. In the event payment terms are provided that differ significantly from the Company's standard business practices, the fees are deemed to not be fixed or determinable and revenue is recognized as the fees become paid. The Company assesses collectability based on a number of factors, including credit worthiness of the customer and past transaction history of the customer. Through September 30, 2016, the Company has not experienced significant credit losses. |
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Deferred Revenue | Deferred Revenue Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from the sale of the Company’s subscription fees, training and professional services. Once the revenue recognition criteria are met, this revenue is recognized ratably over the term of the associated contract. |
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Comprehensive Income (Loss) | Comprehensive Loss Comprehensive loss includes all changes in equity that are not the result of transactions with stockholders. The Company’s comprehensive loss consists of its net loss and changes in unrealized gains (losses) from its available-for-sale investments. The Company had no material reclassifications out of accumulated other comprehensive loss into net loss for the three and nine months ended September 30, 2016 and 2015. |
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Sales Commissions | Sales Commissions Effective January 1, 2016, the Company changed its accounting policy for sales commissions that are incremental and directly related to its customer sales contracts in which revenue is deferred. These commission costs are accrued and capitalized upon execution of a non-cancelable customer contract, and subsequently expensed over the term of such contract in proportion to the related future revenue streams. For commission costs where revenue is recognized, the related commission costs are recorded in the period of revenue recognition. Prior to this change in accounting policy, commission costs were expensed in the period in which they were incurred. The adoption of this accounting policy change has been applied retrospectively to all periods presented in this Quarterly Report on Form 10-Q, in which the cumulative effect of the change has been reflected as of the beginning of the first period presented. Deferred commissions as of September 30, 2016 and December 31, 2015 were $22,435 and $22,802, respectively. During the three and nine months ended September 30, 2016, the Company deferred $8,857 and $23,895 of commission costs and amortized $8,602 and $24,262 within sales and marketing expense, respectively. During the three and nine months ended September 30, 2015, the Company deferred $7,243 and $19,134 of commission costs and amortized $5,824 and $15,375 within sales and marketing expense, respectively. The Company believes this change in accounting policy is preferable as the direct and incremental commission costs are closely related to the revenue, and therefore they should be recorded as an asset and recognized as an expense over the same period that the related revenue is recognized. The cumulative effect of the change on accumulated deficit was $15,060 as of December 31, 2014. The following tables present the changes to the financial statement lines as a result of the accounting change for the periods presented in the accompanying unaudited Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheet
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Comprehensive Loss
There have been no changes, other than as discussed above, in the Company's significant accounting policies for the nine months ended September 30, 2016, as compared to the significant accounting policies described in the Company's Annual Form 10-K for the |
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New Accounting Pronouncements | Recent Accounting Pronouncements In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 makes eight targeted changes how cash receipts and cash payments are presented and classified in the statement of cash flows. The update to the standard is effective for interim and annual periods beginning after December 15, 2017, and requires adoption on a retrospective transition method unless it is impracticable to apply. The Company is currently evaluating the impact of the adoption of ASU 2016-15 on its consolidated financial statements. In June 2016, FASB issued an Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 changes the impairment model for most financial assets, and will require the use of an expected loss model in place of the currently used incurred loss method. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The update to the standard is effective for interim and annual periods beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements. In March 2016, FASB issued Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for interim and annual periods beginning after December 15, 2016. The Company is currently evaluating the impact of the adoption of ASU 2016-09 on its consolidated financial statements. In February 2016, FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which requires lessees to put most leases on their balance sheets but recognize the expenses on their statements of operations in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The new standard is effective for interim and annual periods beginning after December 15, 2018 and early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Originally, ASU 2014-09 would be effective for the Company starting January 1, 2017 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. In July 2015, the FASB voted to amend ASU 2014-09 by approving a one-year deferral of the effective date as well as providing the option to early adopt the standard on the original effective date. The FASB has issued several updates to the standard which i) clarify the application of the principal versus agent guidance (ASU 2016-08); ii) clarify the guidance on inconsequential and perfunctory promises and licensing (ASU 2016-10) and iii) narrow-scope improvements and practical expedients (ASU 2016-12). The Company is currently evaluating the timing, transition method and impact of the adoption of the standard on its consolidated financial statements. |
The Company and Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] | Condensed Consolidated Balance Sheet
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Comprehensive Loss
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Useful lives intangible assets [Table Text Block] | Intangible assets are amortized on a straight-line basis over their estimated lives, which approximate the pattern in which the economic benefits of the intangible assets are consumed, as follows (in years):
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Acquisitions (Tables) |
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Schedule of purchase price [Table Text Block] | The following table summarizes the estimated fair values of acquired assets and liabilities:
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Schedule of purchase price [Table Text Block] | The aggregate purchase price was $11,568. The following table summarizes the fair values of acquired tangible and intangible assets, liabilities and goodwill:
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Schedule of purchase price [Table Text Block] | The following table summarizes the fair values of acquired tangible, intangible assets and goodwill:
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Schedule of purchase price [Table Text Block] | The following table summarizes the fair values of tangible and intangible assets acquired, liabilities assumed and goodwill:
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Goodwill and Intangible Assets (Tables) |
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Schedule of goodwill [Table Text Block] | The goodwill activity and balances are presented below:
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Components of intangible assets excluding goodwill [Table Text Block] | Intangible assets, excluding goodwill, consisted of the following:
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Future estimated amortization costs of intangible assets [Table Text Block] | Amortization of intangible assets expense was $3,667 and $3,210 for the three months ended September 30, 2016 and 2015, respectively, and $10,441 and $8,834 for the nine months ended September 30, 2016 and 2015, respectively. Future estimated amortization of intangible assets expense as of September 30, 2016 are presented below:
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Fair Value Measurements and Investments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value, by balance sheet grouping [Table Text Block] | The following tables summarize, for each category of assets or liabilities carried at fair value, the respective fair value as of September 30, 2016 and December 31, 2015 and the classification by level of input within the fair value hierarchy:
$9,162 |
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Fair value of cash and cash equivalents, and investments [Table Text Block] | The cost and fair value of the Company’s cash and cash equivalents and available-for-sale investments as of September 30, 2016 and December 31, 2015 were as follows:
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Commitments and Contingencies (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future annual minimum lease payments under noncancelable operating and capital leases [Table Text Block] | At September 30, 2016, future annual minimum lease payments under noncancellable operating and capital leases were as follows:
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Convertible Senior Notes (Tables) |
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Convertible Senior Notes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of liability and equity components of convertible debt [Table Text Block] | September 30, 2016 and December 31, 2015:
(1) Recorded on the accompanying Condensed Consolidated Balance Sheets as additional paid-in capital, net of the $2,877 issuance costs. |
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Schedule of convertible note interest and accretion [Table Text Block] | For the three and nine months ended September 30, 2016 and 2015, the Company incurred the following interest expense related to the Notes:
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Stock Equity Plans (Tables) |
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Employee stock purchase plan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation assumptions [Table Text Block] | The fair values were estimated on the grant dates using the Black-Scholes option-pricing model with the following weighted-average assumptions:
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Activity under stock option plan [Table Text Block] | Stock option activity under the Plan is as follows:
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Summary of RSUs awarded and unvested under stock option plan [Table Text Block] |
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Net Loss per Share (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of antidilutive securities excluded from computation of earnings per share [Table Text Block] | The following table presents the potentially dilutive common shares outstanding that were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:
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Segment Reporting (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from external customers by products and services [Table Text Block] | The following sets forth total revenue by solutions offered by the Company and by geographic area. Revenue by geographic area is based upon the billing address of the customer:
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Total revenue and long-lived assets by geographic area [Table Text Block] |
Long-lived assets by geographic area are presented below:
|
The Company and Summary of Significant Accounting Policies The Company and Summary of Significant Accounting Policies - Basis of Presentation and Consolidation (Details) |
3 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Business Acquisition, Equity Interests Issued or Issuable [Line Items] | ||
Number of Businesses Acquired | 1 | 2 |
Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Goodwill activity and balances | |
Opening balance | $ 133,769 |
Add: Goodwill from acquisitions | 6,513 |
Less: Other adjustments to goodwill | 0 |
Closing balance | $ 140,282 |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Jul. 31, 2015 |
Jul. 31, 2012 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||||
Operating lease rent expense | $ 1,197 | $ 984 | $ 3,595 | $ 2,802 | ||
Future annual minimum lease payments under noncancelable operating and capital leases | ||||||
2015, remainder | 11 | 11 | ||||
2016 | 41 | 41 | ||||
2017 | 39 | 39 | ||||
2018 | 37 | 37 | ||||
2019 | 21 | 21 | ||||
Thereafter | 0 | 0 | ||||
Total minimum capital lease payments | 149 | 149 | ||||
Less: Amount representing interest | (18) | (18) | ||||
Present value of capital lease obligations | 131 | 131 | ||||
Less: Current portion | (33) | (33) | ||||
Long-term portion of capital lease obligations | 98 | 98 | ||||
Operating lease obligations | ||||||
2015, remainder | 5,867 | 5,867 | ||||
2016 | 7,448 | 7,448 | ||||
2017 | 5,191 | 5,191 | ||||
2018 | 4,647 | 4,647 | ||||
2019 | 1,900 | 1,900 | ||||
Thereafter | 3,062 | 3,062 | ||||
Total minimum operating lease payments | $ 28,115 | $ 28,115 | ||||
Capital Lease Obligations [Member] | ||||||
Debt instrument | ||||||
Interest rate, stated percentage | 6.50% | 4.50% |
Commitments and Contingencies Legal Contingencies (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Commitments and Contingencies Disclosure [Abstract] | |
Loss Contingency, Loss in Period | $ 10,900 |
Loss Contingency Accrual, Period Increase (Decrease) | 1,938 |
Loss Contingency, Damages Paid, Value | 4,300 |
Settlement payable | $ 3,300 |
Common Stock (Details) - $ / shares shares in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Stockholders' equity: | ||
Preferred stock authorized (in shares) | 5,000 | 5,000 |
Common Stock, Shares Authorized | 200,000 | 200,000 |
Par value of common stock (USD per share) | $ 0.0001 | $ 0.0001 |
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Employee Stock Option [Member] | ||
Number of shares of common stock reserved for future issuance | ||
Shares available for future grant under the stock plans (in shares) | 6,463 | |
ESPP 2012 Plan [Member] | ||
Number of shares of common stock reserved for future issuance | ||
Shares available for future issuance under ESPP | 1,459 | |
2012 Equity Incentive Plan [Member] | Restricted stock units (RSUs) [Member] | ||
Number of shares of common stock reserved for future issuance | ||
Common stock issuable upon settlement of outstanding restricted stock units | 3,275 | 3,311 |
Stock Equity Plans Performance Stock Units (Details) - 2012 Equity Incentive Plan [Member] - Performance Shares [Member] - USD ($) shares in Thousands, $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Performance restricted stock units, Granted in Period | 146 | 186 |
Unamortized stock-based compensation expense | $ 10,809 |
Stock Equity Plans Stock Bonus and Other Liability Awards (Details) - USD ($) shares in Thousands, $ in Thousands |
9 Months Ended | |||
---|---|---|---|---|
Mar. 06, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Fair Value of Liability Award Issued | $ 6,885 | |||
2012 Equity Incentive Plan [Member] | Stock Bonus Awards [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Accrued stock bonuses, Current | $ 4,494 | $ 5,676 | ||
Stock bonus awards, Shares Issued in Period | 93 | 30 | ||
Stock-based Compensation Expense | $ 4,364 | $ 2,817 | ||
Stock Issued During Period, Shares, New Issues | 45 |
Segment Reporting - Revenue by Solution (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016
USD ($)
|
Sep. 30, 2015
USD ($)
|
Sep. 30, 2016
USD ($)
segment
|
Sep. 30, 2015
USD ($)
|
|
Revenue by Solution [Abstract] | ||||
Number of operating and reportable segments | segment | 1 | |||
Revenue from external customers | ||||
Revenue | $ 99,784 | $ 69,149 | $ 268,691 | $ 190,458 |
Protection and Advanced Threat [Member] | ||||
Revenue from external customers | ||||
Revenue | 72,664 | 47,920 | 193,923 | 129,506 |
Archiving, Privacy and Governance [Member] | ||||
Revenue from external customers | ||||
Revenue | $ 27,120 | $ 21,229 | $ 74,768 | $ 60,952 |
Segment Reporting - by Geographic Area (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Segment reporting: | |||||
Revenue | $ 99,784 | $ 69,149 | $ 268,691 | $ 190,458 | |
Total long-lived assets | 47,715 | 47,715 | $ 34,501 | ||
United States [Member] | |||||
Segment reporting: | |||||
Revenue | 82,971 | 56,726 | 223,327 | 156,482 | |
Total long-lived assets | 39,408 | 39,408 | 29,514 | ||
Rest of world [Member] | |||||
Segment reporting: | |||||
Revenue | 16,813 | $ 12,423 | 45,364 | $ 33,976 | |
Total long-lived assets | $ 8,307 | $ 8,307 | $ 4,987 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Valuation allowance | ||||
Income tax expense (benefit) | $ 370 | $ 219 | $ 812 | $ 493 |
Loss before (provision for) benefit from income taxes | 17,997 | $ 26,795 | $ 87,512 | $ 70,827 |
Effective income tax rate | (0.90%) | (0.70%) | ||
Unrecognized tax benefits | 5,528 | $ 5,528 | ||
Accrued interest and penalties | 239 | 239 | ||
Uncertain tax benefits that would affect effective tax rate if recognized | $ 1,152 | 1,152 | ||
Increase (decrease) in gross uncertain tax benefits | 213 | |||
Increase for tax positions taken in the current period | 257 | |||
Increase (decrease) for tax positions taken in prior periods | 9 | |||
Unrecognized Tax Benefits, Reduction Resulting from Lapse of Applicable Statute of Limitations | $ 35 |
Subsequent Events (Details) $ in Thousands |
3 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
| |
Subsequent Event [Member] | |
Subsequent Event [Line Items] | |
Payments to Acquire Businesses, Gross | $ 55,000 |
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