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Actionable news in EIGI: Endurance International Group Holdings, Inc.,

Endurance International Group Holdings: Index To Consolidated Financial Statements

The following excerpt is from the company's SEC filing.

Page(s)

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Stockholders Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Constant Contact, Inc.

In our opinion, the consolidated financial statements listed in the accompanying index present fai rly, in all material respects, the financial position of Constant Contact, Inc. and its subsidiaries (the Company) at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Boston, Massachusetts

February 9, 2016

Consolidated Balance Sheets

(In thousands, except

share and per share data)

ASSETS

Current assets

Cash and cash equivalents

145,479

104,301

Marketable securities

56,279

58,321

Accounts receivable, net of allowance for doubtful accounts

Prepaid expenses and other current assets

10,723

Total current assets

211,294

173,610

Property and equipment, net

46,567

43,739

Restricted cash

Goodwill

95,505

Acquired intangible assets, net

Deferred taxes

Other assets

Total assets

366,628

322,865

LIABILITIES AND STOCKHOLDERS EQUITY

Current liabilities

Accounts payable

Accrued expenses

14,153

12,230

Deferred revenue

39,987

37,838

Total current liabilities

62,197

54,771

Other long-term liabilities

Total liabilities

66,078

58,554

Commitments and contingencies (Note 9)

Stockholders equity

Preferred stock; $0.01 par value; 5,000,000 shares authorized; no shares issued or outstanding

Common stock; $0.01 par value; 100,000,000 shares authorized; 32,331,345 and 31,908,622 shares issued and outstanding at December 31, 2015 and 2014, respectively

Additional paid-in capital

266,714

249,599

Accumulated other comprehensive loss

Retained earnings

33,593

14,403

Total stockholders equity

300,550

264,311

Total liabilities and stockholders equity

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Operations

Years Ended December 31,

(In thousands, except per share data)

Revenue

367,413

331,678

285,383

Cost of revenue

98,507

91,063

81,616

Gross profit

268,906

240,615

203,767

Operating expenses:

Research and development

57,064

53,086

45,567

Sales and marketing

136,153

125,809

111,374

General and administrative

46,190

41,919

38,531

Merger related expenses

Total operating expenses

241,968

220,814

195,472

Income from operations

26,938

19,801

Interest income

Other income (expense), net

Income before income taxes

27,188

20,117

Income tax expense

(7,998

(5,802

(1,256

Net income

19,190

14,315

Net income per share:

Diluted

Weighted average shares outstanding used in computing per share amounts:

32,073

31,619

30,730

33,212

32,836

31,356

Consolidated Statements of Comprehensive Income

Years Ended December 31,

(In thousands)

Other comprehensive income (loss):

Net unrealized losses on marketable securities, net of tax

Reclassification adjustment for realized gains on available-for-sale securities included in net income

Translation adjustment

Total other comprehensive income (loss)

Comprehensive income

19,120

14,290

Consolidated Statements of Changes in Stockholders Equity

(In thousands, except share data)

Common Stock

Paid-in

Capital

Income (Loss)

Earnings

(Accumulated

Deficit)

Shares

Amount

Balance at December 31, 2012

30,651,375

209,675

(7,126

202,867

Issuance of common stock in connection with stock option exercises

671,596

10,440

10,446

Issuance of common stock pursuant to vesting of restricted stock units

87,058

(1,592

(1,591

Issuance of common stock in connection with employee stock purchase plan

79,456

Repurchase and retirement of common stock

(285,900

(5,363

(5,366

Stock-based compensation expense

15,213

Income tax from the exercise of stock options

Unrealized loss on available-for-sale securities

Balance at December 31, 2013

31,203,585

229,457

229,871

Issuance of common stock in connection with stock option and warrant exercises

1,039,713

20,150

20,162

149,881

(3,024

(3,023

69,109

(553,666

(16,355

(16,361

16,850

Balance at December 31, 2014

953,302

18,782

18,791

210,608

(3,580

(3,578

91,291

(832,478

(24,879

(24,887

18,306

Balance at December 31, 2015

Consolidated Statements of Cash Flows

Cash flows from operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

24,896

24,164

22,191

Amortization of premium on investments

18,040

16,650

14,731

Provision for bad debts

Gain on sales of marketable securities

(2,891

Income tax benefit from the exercise of stock options

(6,494

Taxes paid related to net share settlement of restricted stock units

Loss on sublease

Changes in operating assets and liabilities:

(2,454

(3,138

(1,384

Net cash provided by operating activities

64,628

57,414

43,058

Cash flows from investing activities

Purchases of marketable securities

(52,367

(36,582

(30,739

Proceeds from maturities of marketable securities

53,857

18,065

11,534

Proceeds from sales of marketable securities

Net increase in restricted cash

Acquisition of property and equipment, including costs capitalized for development of internal-use software

(27,554

(24,347

(18,891

Net cash used in investing activities

(26,064

(42,231

(34,646

Cash flows from financing activities

Proceeds from issuance of common stock pursuant to exercise of stock options and warrants and vesting of restricted stock units

10,447

Proceeds from issuance of common stock pursuant to employee stock purchase plan

Repurchase of common stock

Net cash provided by financing activities

Effects of exchange rates on cash

Net increase in cash and cash equivalents

41,178

21,823

14,703

Cash and cash equivalents, beginning of year

82,478

67,775

Cash and cash equivalents, end of year

Supplemental disclosure of cash flow information

Cash paid for income taxes

Supplemental disclosure of noncash investing and financing activities:

Capitalization of stock-based compensation

Acquisition of property and equipment included in accounts payable and accrued expenses

Notes to Consolidated Financial Statements

(amounts in thousands, except share and per share amounts)

Nature of the Business

Constant Contact, Inc. (the Company) was incorporated as a Massachusetts corporation in 1995 and was reincorporated in the State of Delaware in 2000. The Company is a leading provider of online marketing tools that are designed for small organizations, including small businesses, associations and non-profits. The Company seeks to help customers succeed by creating and growing their customer and member relationships through easy-to-use products combined with education, support, KnowHow

and coaching. In April 2014, the Company formally launched Constant Contact Toolkit, an integrated online marketing platform that simplifies small business marketing by bringing together the tools needed to drive repeat customers and reach new ones. The Company also offers a suite of online marketing tools, including Email Marketing, EventSpot

, Social Campaigns, SaveLocal, SinglePlatform and Survey, that enables customers to launch and monitor marketing campaigns across multiple channels, including email, social media, events, local deals, online listings and surveys. These products are marketed and sold directly by the Company and through a wide variety of partners primarily in the United States of America.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include those of the Company and its subsidiaries, after elimination of all intercompany accounts and transactions. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates these estimates, judgments and assumptions, including those related to revenue recognition, stock-based compensation, goodwill and acquired intangible assets, capitalization of software and website development costs and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities and recorded revenue and expenses that are not readily apparent from other sources. Actual results could differ from these estimates.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, are used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

During the years ended December 31, 2015, 2014 and 2013, there were no transfers between Level 1, Level 2 and Level 3.

The following tables present the Companys fair value hierarchy for its assets, which are measured at fair value on a recurring basis as of December 31, 2015 and 2014:

Fair Value Measurements at December 31, 2015 Using

Level 1

Level 3

Financial Assets:

Money Market Instruments

United States Treasury Notes

24,072

Corporate and Agency Bonds

31,608

Commercial Paper

32,031

32,207

64,238

Fair Value Measurements at December 31, 2014 Using

20,006

37,316

25,891

38,315

64,206

Fair Value Option for Financial Assets and Financial Liabilities

Authoritative guidance allows companies to choose to measure many financial instruments and certain other items at fair value. The Company has elected not to apply the fair value option to any of its financial assets or liabilities.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the time of acquisition to be cash equivalents. The Company also considers receivables related to customer credit card purchases of $1,547 and $1,502 at December 31, 2015 and 2014, respectively, to be equivalent to cash. Cash equivalents are stated at fair value.

Marketable Securities

The Companys marketable securities are classified as available-for-sale and are carried at fair value with the unrealized gains and losses reported as a component of accumulated other comprehensive income in stockholders equity. Realized gains and losses and declines in value judged to be other than temporary are included as a component of other income (expense), net based on the specific identification method. Fair value is determined based on quoted market prices.

At December 31, 2015, marketable securities by security type consisted of:

Amortized

Losses

Estimated

24,138

31,646

56,383

At December 31, 2015, marketable securities consisted of investments that mature within one year with the exception of government treasuries and corporate and agency bonds with a fair value of $16,735, which have maturities within two years.

At December 31, 2014, marketable securities by security type consisted of:

20,000

37,330

58,329

Accounts Receivable

Management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. The Company reserves for receivables that are determined to be uncollectible, if any, in its allowance for doubtful accounts. After the Company has exhausted all collection efforts, the outstanding receivable is written off against the allowance.

Concentration of Credit Risk and Significant Products and Customers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. At December 31, 2015 and 2014, the Company had substantially all cash balances at certain financial institutions without or in excess of federally insured limits, however, the Company maintains its cash balances and custody of its marketable securities with accredited financial institutions. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

For the years ended December 31, 2015, 2014 and 2013, revenue from the Companys email marketing product alone as a percentage of total revenue was approximately 74%, 80% and 84%, respectively. No customer accounted for more than 10% of total revenue during these years.

Goodwill and Acquired Intangible Assets

The Company records goodwill when consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if facts and circumstances warrant a review. The Company performs its annual assessment for impairment of goodwill on November 30

of each year and has determined that there is a single reporting unit for the purpose of conducting this annual goodwill impairment assessment. For purposes of assessing potential impairment, the Company annually estimates the fair value of the reporting unit (based on the Companys market capitalization) and compares this amount to the carrying value of the reporting unit (as reflected by the Companys total stockholders equity). If the Company determines that the carrying value of the reporting unit exceeds its fair value, an impairment charge would be required.

Intangible assets are recorded at their estimated fair values at the date of acquisition. The Company amortizes acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of the assets or, where applicable and if shorter, over the lease term. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is credited or charged to the statement of operations. Repairs and maintenance costs are expensed as incurred.

Estimated useful lives of assets are as follows:

Computer equipment

3 years

Software

Furniture and fixtures

5 years

Leasehold improvements

Shorter of life of lease or

Long-Lived Assets

The Company reviews the carrying values of its long-lived assets for possible impairment when events or changes in circumstance indicate that the related carrying amount may not be recoverable. Undiscounted cash flows are compared to the carrying value and when required, impairment losses on assets to be held and used are recognized based on the excess of the assets carrying amount over the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

Revenue Recognition

The Company provides access to its products primarily through subscription arrangements whereby the customer is charged a fee for access for a defined term. Subscription arrangements include access to use the Companys software via the Internet and support services, such as telephone, email and chat support. When there is evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured, the Company recognizes revenue on a daily basis over the subscription period as the services are delivered. Delivery is considered to have commenced at the time the customer has paid for the products and has access to the account via a log-in and password. The Company also offers ancillary services to its customers related to its subscription-based products such as custom services and training. When sold together, revenue from custom services, training and subscription products are accounted for separately based on vendor-specific objective evidence of fair value of each of the services as those services have value on a standalone basis and do not involve a significant degree of risk or unique acceptance criteria. Revenue from custom services and training is recognized as the services are performed. Revenue from transaction-based products and services is recognized based on the transactional fee charged when there is evidence of an arrangement, the fee is fixed or determinable, collectability is deemed reasonably assured and the transaction has occurred.

Deferred Revenue

Deferred revenue consists of payments received in advance of delivery of the Companys on-demand products described above and is recognized as the revenue recognition criteria are met. The Companys customers generally pay for services in advance on a monthly, semiannual or annual basis.

Software and Website Development Costs

Research and development costs are expensed as incurred and primarily include salaries, fees to consultants, and other related...


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