altr-10q_20180930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended September 30, 2018

OR

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

For the transition period from                  to                 

Commission File Number: 001-38263

 

ALTAIR ENGINEERING INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

38-2591828

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

1820 East Big Beaver Road, Troy, Michigan

 

48083

(Address of principal executive offices)

 

(Zip Code)

(248) 614-2400

(Registrant’s telephone number, including area code)

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

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

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On October 26, 2018 there were 38,157,669 shares of the registrant’s Class A common stock outstanding and 32,170,732 shares of the registrant’s Class B common stock outstanding.

 

 

 

 

 


ALTAIR ENGINEERING INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2018

INDEX

 

 

 

 

 

 

 

 

Page

 

 

 

 

 

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Financial Statements – Unaudited

 

3

 

 

 

 

 

 

 

 

 

 

 

a)

 

Consolidated balance sheets

 

3

 

 

 

 

 

 

 

 

 

 

 

b)

 

Consolidated statements of operations

 

4

 

 

 

 

 

 

 

 

 

 

 

c)

 

Consolidated statements of comprehensive income (loss)

 

5

 

 

 

 

 

 

 

 

 

 

 

d)

 

Consolidated statement of changes in stockholders’ equity

 

6

 

 

 

 

 

 

 

 

 

 

 

e)

 

Consolidated statements of cash flows

 

7

 

 

 

 

 

 

 

 

 

 

 

f)

 

Notes to consolidated financial statements

 

8

 

 

 

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

 

 

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

40

 

 

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

40

 

 

 

 

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

42

 

 

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

42

 

 

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

43

 

 

 

 

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

43

 

 

 

 

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

43

 

 

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

43

 

 

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

44

 

 

 

 

 

 

 

 

SIGNATURES

 

 

 

 

 

45

 

 

 

 


 

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

September 30, 2018

 

 

December 31, 2017

 

(In thousands, except per share data)

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

197,413

 

 

$

39,213

 

Accounts receivable, net

 

 

69,046

 

 

 

86,635

 

Inventory, net

 

 

1,234

 

 

 

1,980

 

Income tax receivable

 

 

9,841

 

 

 

6,054

 

Prepaid expenses and other current assets

 

 

12,149

 

 

 

10,006

 

Total current assets

 

 

289,683

 

 

 

143,888

 

Property and equipment, net

 

 

29,679

 

 

 

31,446

 

Goodwill

 

 

62,905

 

 

 

62,706

 

Other intangible assets, net

 

 

22,329

 

 

 

24,461

 

Deferred tax assets

 

 

7,837

 

 

 

8,351

 

Other long-term assets

 

 

15,580

 

 

 

17,019

 

TOTAL ASSETS

 

$

428,013

 

 

$

287,871

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

400

 

 

$

232

 

Accounts payable

 

 

5,592

 

 

 

4,880

 

Accrued compensation and benefits

 

 

28,750

 

 

 

26,560

 

Obligations for acquisition of businesses

 

 

831

 

 

 

13,925

 

Other accrued expenses and current liabilities

 

 

20,222

 

 

 

21,744

 

Deferred revenue

 

 

136,991

 

 

 

130,122

 

Total current liabilities

 

 

192,786

 

 

 

197,463

 

Long-term debt, net of current portion

 

 

670

 

 

 

178

 

Deferred revenue, non-current

 

 

9,722

 

 

 

9,640

 

Other long-term liabilities

 

 

13,036

 

 

 

17,647

 

TOTAL LIABILITIES

 

 

216,214

 

 

 

224,928

 

Commitments and contingencies

 

 

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

2,352

 

 

 

2,352

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Preferred stock ($0.0001 par value), authorized 45,000 shares, none issued and outstanding

 

 

 

 

 

 

Common stock ($0.0001 par value)

 

 

 

 

 

 

 

 

Class A common stock, authorized 513,797 shares, issued and outstanding 38,120

   and 26,725 shares as of September 30, 2018 and December 31, 2017, respectively

 

 

4

 

 

 

2

 

Class B common stock, authorized 41,203 shares, issued and outstanding 32,171

   and 36,508 shares as of September 30, 2018 and December 31, 2017, respectively

 

 

3

 

 

 

4

 

Additional paid-in capital

 

 

370,402

 

 

 

232,156

 

Accumulated deficit

 

 

(153,759

)

 

 

(166,499

)

Accumulated other comprehensive loss

 

 

(7,203

)

 

 

(5,072

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

209,447

 

 

 

60,591

 

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

 

$

428,013

 

 

$

287,871

 

 

See accompanying notes to consolidated financial statements.

 

 

 

3


 

 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

(in thousands, except per share data)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

$

71,302

 

 

$

63,208

 

 

$

212,258

 

 

$

176,905

 

Software related services

 

 

8,692

 

 

 

8,574

 

 

 

26,872

 

 

 

25,749

 

Total software

 

 

79,994

 

 

 

71,782

 

 

 

239,130

 

 

 

202,654

 

Client engineering services

 

 

12,155

 

 

 

11,477

 

 

 

36,652

 

 

 

36,071

 

Other

 

 

1,722

 

 

 

1,679

 

 

 

5,386

 

 

 

4,741

 

Total revenue

 

 

93,871

 

 

 

84,938

 

 

 

281,168

 

 

 

243,466

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

 

9,831

 

 

 

9,166

 

 

 

32,736

 

 

 

26,799

 

Software related services

 

 

6,352

 

 

 

6,457

 

 

 

19,573

 

 

 

20,230

 

Total software

 

 

16,183

 

 

 

15,623

 

 

 

52,309

 

 

 

47,029

 

Client engineering services

 

 

9,817

 

 

 

9,231

 

 

 

29,977

 

 

 

29,200

 

Other

 

 

1,204

 

 

 

1,448

 

 

 

3,416

 

 

 

3,745

 

Total cost of revenue

 

 

27,204

 

 

 

26,302

 

 

 

85,702

 

 

 

79,974

 

Gross profit

 

 

66,667

 

 

 

58,636

 

 

 

195,466

 

 

 

163,492

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

24,301

 

 

 

27,590

 

 

 

71,748

 

 

 

69,198

 

Sales and marketing

 

 

19,275

 

 

 

22,345

 

 

 

58,435

 

 

 

58,683

 

General and administrative

 

 

17,234

 

 

 

29,175

 

 

 

51,636

 

 

 

66,465

 

Amortization of intangible assets

 

 

1,739

 

 

 

1,189

 

 

 

5,665

 

 

 

3,287

 

Other operating income

 

 

(4,850

)

 

 

(735

)

 

 

(7,433

)

 

 

(4,065

)

Total operating expenses

 

 

57,699

 

 

 

79,564

 

 

 

180,051

 

 

 

193,568

 

Operating income (loss)

 

 

8,968

 

 

 

(20,928

)

 

 

15,415

 

 

 

(30,076

)

Interest expense

 

 

31

 

 

 

634

 

 

 

92

 

 

 

1,793

 

Other (income) expense, net

 

 

(970

)

 

 

52

 

 

 

(2,046

)

 

 

838

 

Income (loss) before income taxes

 

 

9,907

 

 

 

(21,614

)

 

 

17,369

 

 

 

(32,707

)

Income tax expense

 

 

2,600

 

 

 

8,012

 

 

 

4,629

 

 

 

6,353

 

Net income (loss)

 

$

7,307

 

 

$

(29,626

)

 

$

12,740

 

 

$

(39,060

)

Income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common

  stockholders, basic

 

$

0.10

 

 

$

(0.59

)

 

$

0.19

 

 

$

(0.78

)

Net income (loss) per share attributable to common

  stockholders, diluted

 

$

0.10

 

 

$

(0.59

)

 

$

0.17

 

 

$

(0.78

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in computing

  net income (loss) per share, basic

 

 

70,001

 

 

 

50,606

 

 

 

66,429

 

 

 

50,374

 

Weighted average number of shares used in computing

  net income (loss) per share, diluted

 

 

76,709

 

 

 

50,606

 

 

 

74,182

 

 

 

50,374

 

 

See accompanying notes to consolidated financial statements.

 

 

4


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

(in thousands)

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income (loss)

 

$

7,307

 

 

$

(29,626

)

 

$

12,740

 

 

$

(39,060

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation (net of tax effect of $0,

  $0, $0 and $0, respectively)

 

 

(431

)

 

 

(11

)

 

 

(2,273

)

 

 

1,500

 

 

Retirement related benefit plans (net of tax effect of $(9),

  $41, $(16) and $41, respectively)

 

 

36

 

 

 

52

 

 

 

142

 

 

 

8

 

Total other comprehensive income (loss)

 

 

(395

)

 

 

41

 

 

 

(2,131

)

 

 

1,508

 

Comprehensive income (loss)

 

$

6,912

 

 

$

(29,585

)

 

$

10,609

 

 

$

(37,552

)

 

See accompanying notes to consolidated financial statements.

 

 

 

5


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Common stock

 

 

Additional

 

 

 

 

 

 

other

 

 

Total

 

 

 

Class A

 

 

Class B

 

 

paid-in

 

 

Accumulated

 

 

comprehensive

 

 

stockholders’

 

(in thousands)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

loss

 

 

equity

 

Balance at January 1, 2018

 

 

26,725

 

 

$

2

 

 

 

36,508

 

 

$

4

 

 

$

232,156

 

 

$

(166,499

)

 

$

(5,072

)

 

$

60,591

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,740

 

 

 

 

 

 

12,740

 

Follow-on public offering, net of offering costs of $370

 

 

5,731

 

 

 

1

 

 

 

(1,675

)

 

 

(1

)

 

 

135,201

 

 

 

 

 

 

 

 

 

135,201

 

Adjustment for acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(96

)

 

 

 

 

 

 

 

 

(96

)

Conversion from Class B to Class A

 

 

2,662

 

 

 

 

 

 

(2,662

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

3,002

 

 

 

1

 

 

 

 

 

 

 

 

 

1,928

 

 

 

 

 

 

 

 

 

1,929

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,213

 

 

 

 

 

 

 

 

 

1,213

 

Foreign currency translation, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,273

)

 

 

(2,273

)

Retirement related benefit plans, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

142

 

 

 

142

 

Balance at September 30, 2018

 

 

38,120

 

 

$

4

 

 

 

32,171

 

 

$

3

 

 

$

370,402

 

 

$

(153,759

)

 

$

(7,203

)

 

$

209,447

 

 

See accompanying notes to consolidated financial statements.

 

 

6


 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

(In thousands)

 

2018

 

 

2017

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

12,740

 

 

$

(39,060

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

10,895

 

 

 

7,895

 

Provision for bad debt

 

 

455

 

 

 

517

 

Stock-based compensation expense

 

 

1,213

 

 

 

39,302

 

Gain on sale of assets held for sale and other

 

 

(4,544

)

 

 

(20

)

Impairment of intangible assets

 

 

608

 

 

 

 

Deferred income taxes

 

 

(300

)

 

 

(4,793

)

Other, net

 

 

(116

)

 

 

169

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

15,674

 

 

 

12,016

 

Prepaid expenses and other current assets

 

 

(6,334

)

 

 

431

 

Other long-term assets

 

 

36

 

 

 

(11,024

)

Accounts payable

 

 

796

 

 

 

(1,583

)

Accrued compensation and benefits

 

 

2,650

 

 

 

(211

)

Other accrued expenses and current liabilities

 

 

(4,626

)

 

 

6,122

 

Deferred revenue

 

 

11,275

 

 

 

7,694

 

Net cash provided by operating activities

 

 

40,422

 

 

 

17,455

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments for acquisition of businesses, net of cash acquired

 

 

(15,950

)

 

 

(15,582

)

Proceeds from sale of assets held for sale and other

 

 

6,613

 

 

 

20

 

Capital expenditures

 

 

(5,333

)

 

 

(4,367

)

Payments for acquisition of developed technology

 

 

(2,738

)

 

 

(2,120

)

Other investing activities, net

 

 

 

 

 

(29

)

Net cash used in investing activities

 

 

(17,408

)

 

 

(22,078

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of Class A common stock in follow-on public offering,

    net of underwriters' discounts and commissions

 

 

135,572

 

 

 

 

Proceeds from the exercise of stock options

 

 

1,929

 

 

 

476

 

Payments for follow-on public offering and initial public offering costs

 

 

(541

)

 

 

(2,595

)

Payments for redemption of common stock

 

 

(119

)

 

 

(918

)

Principal payments on long-term debt

 

 

(101

)

 

 

(8,392

)

Payments on revolving commitment

 

 

 

 

 

(71,676

)

Borrowings under revolving commitment

 

 

 

 

 

86,270

 

Other financing activities

 

 

(226

)

 

 

(31

)

Net cash provided by financing activities

 

 

136,514

 

 

 

3,134

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(1,354

)

 

 

1,301

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

158,174

 

 

 

(188

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

39,578

 

 

 

17,139

 

Cash, cash equivalents and restricted cash at end of period

 

$

197,752

 

 

$

16,951

 

Supplemental disclosure of cash flow:

 

 

 

 

 

 

 

 

Interest paid

 

$

70

 

 

$

1,722

 

Income taxes paid

 

$

5,900

 

 

$

4,154

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Capital leases

 

$

995

 

 

$

 

Property and equipment in accounts payable

 

$

228

 

 

$

144

 

Follow-on public offering costs in accounts payable

 

$

15

 

 

$

 

Promissory notes issued and deferred payment obligations for acquisitions

 

$

278

 

 

$

12,440

 

Issuance of common stock in connection with acquisitions

 

$

 

 

$

8,712

 

Issuance of common stock with put rights

 

$

 

 

$

2,352

 

Initial public offering costs in other long-term assets

 

$

 

 

$

866

 

 

See accompanying notes to consolidated financial statements.

7


 

 

ALTAIR ENGINEERING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.

Organization and description of business

Altair Engineering Inc. (“Altair” or the “Company”) is incorporated in the state of Delaware. The Company is a provider of enterprise-class engineering software enabling innovation across the entire product lifecycle from concept design to in-service operation. Altair transforms design and decision making by applying simulation, machine learning, and optimization throughout product lifecycles. The Company is headquartered in Troy, Michigan.

Follow-on public offering

In June 2018, the Company closed its follow-on public offering (the “Offering”), in which the Company issued and sold 4,056,004 shares of Class A common stock (inclusive of 763,424 shares sold upon the exercise by the underwriters of their option to purchase additional shares of our Class A common stock). The price per share to the public was $35.00. The Company received aggregate proceeds of $135.6 million from the Offering, net of underwriters’ discounts and commissions, before deducting offering costs of approximately $0.4 million.

The Offering also included the sale of 2,307,420 shares of Class A common stock by selling stockholders, giving effect to the conversion of 1,675,420 shares of the Company’s Class B common stock into an equivalent number of shares of Class A common stock and the exercise of 257,000 options to purchase Class A common stock. The Company did not receive any proceeds from the sale of shares of Class A common stock by the selling stockholders other than the $0.5 million in proceeds from exercises of stock options by certain selling stockholders.  

 

2.

Accounting policies

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information.   Accordingly, the accompanying statements do not include all the information and notes required by GAAP for complete financial statements.  The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements (and notes thereto) for the year ended December 31, 2017, included in the most recent Annual Report on Form 10-K filed with the SEC.  In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting periods.  Considerable judgment is often involved in making these determinations; use of different assumptions could result in significantly different results.  Management believes its assumptions and estimates are reasonable and appropriate.  However, actual results may differ from those estimates.  In addition, the results of operations for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for any future period.  

There have been no material changes to Altair’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.  

The Company has concluded that all material transactions that have occurred that require disclosure or adjustments to the consolidated financial statements have been reported herein.  See Note 17 – Subsequent events for additional information.

 


8


 

Cash, cash equivalents and restricted cash

The Company considers all highly liquid investments with original or remaining maturities of 90 days or less at the date of purchase to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value.

Restricted cash is included in other long-term assets on the consolidated balance sheets. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheet that sum to the total of the amounts reported in the consolidated statement of cash flows (in thousands):

 

 

 

September 30, 2018

 

December 31, 2017

 

Cash and cash equivalents

 

$

197,413

 

$

39,213

 

Restricted cash included in other long-term assets

 

 

339

 

 

365

 

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

 

$

197,752

 

$

39,578

 

 

Restricted cash represents amounts required for a contractual agreement with an insurer for the payment of potential health insurance claims, and term deposits for bank guarantees.

Receivable for French R&D credit

The French government provides a research and development (“R&D”) tax credit known as Credit Impôt Recherche, or CIR, in order to encourage Companies to invest in R&D activities.  The tax credit is deductible from French income tax and any excess is carried forward three years.  After three years, any unused credit may be reimbursed to the Company by the French government.  As of September 30, 2018, the Company had approximately $11.1 million in receivables from the French government related to CIR, of which $3.6 million is recorded in income tax receivable and the remaining $7.5 million is recorded in other long-term assets. CIR is subject to customary audit by French tax authorities.

Mezzanine equity

In 2017, the Company issued 200,000 shares of Class A common stock to a third party as partial consideration for the purchase of developed technology. These shares have a put right that can be exercised by the holder five years from date of purchase at $12.50 per share that requires the shares to be recorded at fair value at the issuance date and classified as mezzanine equity in the consolidated balance sheet. The put right option is terminated if the shareholders sell their shares. Classification of the of instrument shall remain as mezzanine equity until one of the following three events take place: (1) shares are sold on the open market; (2) a redemption feature lapses; or (3) there is a modification of the terms of the instrument.

Income (loss) per share

Basic income (loss) per share attributable to common stockholders is computed using the weighted average number of shares of common stock outstanding for the period, excluding stock options and restricted stock units (“RSUs”). Diluted income (loss) per share attributable to common stockholders is based upon the weighted average number of shares of common stock outstanding for the period and potentially dilutive common shares, including the effect of stock options and RSUs under the treasury stock method. The following table sets forth the computation of the numerators and denominators used in the basic and diluted income (loss) per share amounts (in thousands, except per share data):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

7,307

 

 

$

(29,626

)

 

$

12,740

 

 

$

(39,060

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic income (loss) per share—

weighted average shares

 

 

70,001

 

 

 

50,606

 

 

 

66,429

 

 

 

50,374

 

Effect of dilutive securities, stock options and RSUs

 

 

6,708

 

 

 

 

 

 

7,753

 

 

 

 

Denominator for dilutive income (loss) per share

 

 

76,709

 

 

 

50,606

 

 

 

74,182

 

 

 

50,374

 

Net income (loss) per share attributable to common

  stockholders, basic

 

$

0.10

 

 

$

(0.59

)

 

$

0.19

 

 

$

(0.78

)

Net income (loss) per share attributable to common

  stockholders, diluted

 

$

0.10

 

 

$

(0.59

)

 

$

0.17

 

 

$

(0.78

)

 

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The computation of diluted income (loss) per share does not include shares that are anti-dilutive under the treasury stock method because their exercise prices are higher than the average fair value of the Company’s stock during the period or due to a net loss in the period. For the three and nine months ended September 30, 2018, there were no anti-dilutive shares excluded from the computation of income (loss) per share. For the three and nine months ended September 30, 2017, respectively, there were 10.1 million and 9.8 million anti-dilutive shares excluded from the computation of income (loss) per share.

 

3.

Recent accounting guidance

Accounting standards adopted

The Company adopted Accounting Standards Update, “ASU” 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, on January 1, 2018. ASU 2017-09 amends the guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The Company adopted ASU 2017-09 on a prospective basis, and the adoption did not have a material effect on the Company’s consolidated financial statements.

Accounting standards not yet adopted

The Company will cease to qualify as an emerging growth company (as defined in the Jumpstart Our Business Startups Act of 2012) as of December 31, 2018, therefore the public company adoption dates mentioned below will be applicable at that time.

Revenue Recognition—In May 2014, the Financial Accounting Standards Board, or “FASB”, issued ASU 2014-09, Revenue from Contracts with Customers. This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most existing revenue recognition guidance under GAAP. The core principle of the guidance is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures about the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date that defers the effective date of ASU 2014-09 for all entities by one year for public business entities. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. For all other entities, including emerging growth co