þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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11-2617163
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
þ
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Accelerated filer
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¨
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Non-accelerated filer
¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Third Quarter 2016 Form 10-Q
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1
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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2
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Third Quarter 2016 Form 10-Q
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PART I. FINANCIAL INFORMATION
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Third Quarter 2016 Form 10-Q
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3
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4
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Third Quarter 2016 Form 10-Q
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Third Quarter 2016 Form 10-Q
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5
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6
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Third Quarter 2016 Form 10-Q
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1. Organization
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2. Summary of Significant Accounting Policies
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Third Quarter 2016 Form 10-Q
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7
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8
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Third Quarter 2016 Form 10-Q
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Third Quarter 2016 Form 10-Q
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9
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•
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Level 1 - Quoted prices for identical assets or liabilities in active markets;
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•
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Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
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•
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Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
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10
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Third Quarter 2016 Form 10-Q
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(dollars in thousands)
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As of January 1, 2016
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|||
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Balance sheet location
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Amount
|
||
Decrease in deferred tax liabilities related to the cumulative effect adjustment from our election to recognize forfeitures as they occur rather than applying an estimated forfeiture rate
|
Deferred tax liability
|
$
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(606
|
)
|
Increase in additional paid-in capital resulting from our election to recognize forfeitures as they occur
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Additional paid-in capital
|
$
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1,540
|
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Net charge to retained earnings for cumulative effect adjustment from adoption of ASU 2016-09
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Retained earnings
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$
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(934
|
)
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Third Quarter 2016 Form 10-Q
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11
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Consolidated balance sheets:
|
|
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||||||||
(dollars in thousands)
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As of March 31, 2016
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|
As of June 30, 2016
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||||||||||
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As Reported
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As Adjusted
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|
As Reported
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As Adjusted
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||||||||
Additional paid-in capital
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$
|
285,376
|
|
$
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285,606
|
|
|
$
|
294,810
|
|
$
|
294,019
|
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Retained earnings
|
$
|
134,192
|
|
$
|
134,500
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|
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$
|
136,338
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$
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137,893
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||||||||
Consolidated statements of comprehensive income:
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||||||||
(dollars in thousands, except per share amounts)
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Three months ended
March 31, 2016
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Three months ended
June 30, 2016
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||||||||||
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As Reported
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As Adjusted
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|
As Reported
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As Adjusted
|
||||||||
Income tax provision
|
$
|
2,664
|
|
$
|
1,595
|
|
|
$
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3,598
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$
|
1,778
|
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Net income
|
$
|
4,995
|
|
$
|
6,237
|
|
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$
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7,813
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$
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9,060
|
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Basic earnings per share
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$
|
0.11
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$
|
0.14
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|
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$
|
0.17
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$
|
0.20
|
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Diluted earnings per share
|
$
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0.11
|
|
$
|
0.13
|
|
|
$
|
0.17
|
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$
|
0.19
|
|
Diluted weighted average shares outstanding
|
46,757,458
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47,064,164
|
|
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46,927,626
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|
47,263,844
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||||
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||||||||
Consolidated statements of cash flows:
|
|
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|
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||||||||
(dollars in thousands)
|
Three months ended
March 31, 2016
|
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Six months ended
June 30, 2016
|
||||||||||
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As Reported
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As Adjusted
|
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As Reported
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As Adjusted
|
||||||||
Net cash provided by operating activities
|
$
|
104
|
|
$
|
6,757
|
|
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$
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37,987
|
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$
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48,753
|
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Net cash provided by (used in) financing activities
|
$
|
9,546
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|
$
|
2,893
|
|
|
$
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(13,852
|
)
|
$
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(24,618
|
)
|
12
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|
Third Quarter 2016 Form 10-Q
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3. Business Combinations
|
Third Quarter 2016 Form 10-Q
|
|
13
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(dollars in thousands)
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Purchase Price Allocation
|
|
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Net working capital, excluding deferred revenue
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$
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202
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Property and equipment
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2,457
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Deferred revenue
|
(6,500
|
)
|
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Deferred tax asset
|
2,637
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Intangible assets
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97,800
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Goodwill
|
90,376
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Total purchase price
(1)
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$
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186,972
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Intangible
assets
acquired
|
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Weighted
average amortization period
|
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(in thousands)
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(in years)
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Customer relationships
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$
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72,300
|
|
17
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Marketing assets
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1,200
|
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3
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Acquired technology
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22,100
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7
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Non-compete agreements
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2,200
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|
5
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|
Total intangible assets
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$
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97,800
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|
14
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14
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|
Third Quarter 2016 Form 10-Q
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|
Three months ended September 30,
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Nine months ended
September 30, |
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||
(dollars in thousands, except per share amounts)
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2015
|
|
|
2015
|
|
||
Revenue
|
$
|
168,190
|
|
|
$
|
488,172
|
|
Net income
|
$
|
6,056
|
|
|
$
|
16,579
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Basic earnings per share
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$
|
0.13
|
|
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$
|
0.36
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Diluted earnings per share
|
$
|
0.13
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$
|
0.36
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4. Earnings Per Share
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|
Three months ended September 30,
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Nine months ended
September 30, |
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||||||||
(dollars in thousands, except per share amounts)
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2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||
Numerator:
|
|
|
|
|
|
||||||||
Net income
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$
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8,934
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$
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7,911
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$
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24,231
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$
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19,238
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|
Denominator:
|
|
|
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||||||||
Weighted average common shares
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46,159,956
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45,616,832
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|
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46,078,306
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45,576,029
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|
||||
Add effect of dilutive securities:
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||||||||
Stock-based awards
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1,234,150
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|
979,882
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1,190,163
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|
827,167
|
|
||||
Weighted average common shares assuming dilution
|
47,394,106
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46,596,714
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|
47,268,469
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|
46,403,196
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|
||||
Earnings per share:
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.19
|
|
$
|
0.17
|
|
|
$
|
0.53
|
|
$
|
0.42
|
|
Diluted
|
$
|
0.19
|
|
$
|
0.17
|
|
|
$
|
0.51
|
|
$
|
0.41
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive shares excluded from calculations of diluted earnings per share
|
1,723
|
|
9,765
|
|
|
3,766
|
|
18,658
|
|
Third Quarter 2016 Form 10-Q
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|
15
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5. Fair Value Measurements
|
|
Fair value measurement using
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|
|
||||||||||||
(dollars in thousands)
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
||||
Fair value as of September 30, 2016
|
|
|
|
|
|
|
|
||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative instruments
(1)
|
$
|
—
|
|
|
$
|
654
|
|
|
$
|
—
|
|
|
$
|
654
|
|
Total financial liabilities
|
$
|
—
|
|
|
$
|
654
|
|
|
$
|
—
|
|
|
$
|
654
|
|
|
|
|
|
|
|
|
|
||||||||
Fair value as of December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Derivative instruments
(1)
|
$
|
—
|
|
|
$
|
406
|
|
|
$
|
—
|
|
|
$
|
406
|
|
Total financial assets
|
$
|
—
|
|
|
$
|
406
|
|
|
$
|
—
|
|
|
$
|
406
|
|
|
|
|
|
|
|
|
|
||||||||
Fair value as of December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivative instruments
(1)
|
$
|
—
|
|
|
$
|
438
|
|
|
$
|
—
|
|
|
$
|
438
|
|
Total financial liabilities
|
$
|
—
|
|
|
$
|
438
|
|
|
$
|
—
|
|
|
$
|
438
|
|
(1)
|
The fair value of our interest rate swaps was based on model-driven valuations using LIBOR rates, which are observable at commonly quoted intervals. Accordingly, our interest rate swaps are classified within Level 2 of the fair value hierarchy.
|
16
|
|
Third Quarter 2016 Form 10-Q
|
6. Goodwill and Other Intangible Assets
|
(dollars in thousands)
|
ECBU
|
GMBU
|
IBU
|
Total
|
||||||||
Balance at December 31, 2015
|
$
|
240,494
|
|
$
|
190,976
|
|
$
|
4,979
|
|
$
|
436,449
|
|
Additions related to current year business combination
|
426
|
|
1,882
|
|
34
|
|
2,342
|
|
||||
Adjustments related to prior year business combination
|
—
|
|
(182
|
)
|
—
|
|
(182
|
)
|
||||
Effect of foreign currency translation
|
—
|
|
—
|
|
(159
|
)
|
(159
|
)
|
||||
Balance at September 30, 2016
|
$
|
240,920
|
|
$
|
192,676
|
|
$
|
4,854
|
|
$
|
438,450
|
|
|
Three months ended September 30,
|
|
|
Nine months ended
September 30, |
|
||||||||
(dollars in thousands)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||
Included in cost of revenue:
|
|
|
|
|
|
||||||||
Cost of subscriptions
|
$
|
7,790
|
|
$
|
5,761
|
|
|
$
|
23,454
|
|
$
|
17,300
|
|
Cost of maintenance
|
1,332
|
|
1,000
|
|
|
3,996
|
|
3,160
|
|
||||
Cost of services
|
655
|
|
698
|
|
|
1,965
|
|
2,007
|
|
||||
Cost of license fees and other
|
85
|
|
86
|
|
|
255
|
|
283
|
|
||||
Total included in cost of revenue
|
9,862
|
|
7,545
|
|
|
29,670
|
|
22,750
|
|
||||
Included in operating expenses
|
687
|
|
524
|
|
|
2,147
|
|
1,536
|
|
||||
Total amortization of intangibles from business combinations
|
$
|
10,549
|
|
$
|
8,069
|
|
|
$
|
31,817
|
|
$
|
24,286
|
|
Third Quarter 2016 Form 10-Q
|
|
17
|
7. Consolidated Financial Statement Details
|
(dollars in thousands)
|
September 30,
2016 |
|
December 31,
2015 |
|
||
Deferred sales commissions
|
$
|
34,489
|
|
$
|
30,141
|
|
Prepaid software maintenance
|
17,488
|
|
15,308
|
|
||
Deferred professional services costs
|
2,113
|
|
3,603
|
|
||
Taxes, prepaid and receivable
|
4,892
|
|
9,121
|
|
||
Deferred tax asset
|
3,135
|
|
2,869
|
|
||
Prepaid royalties
|
1,431
|
|
1,767
|
|
||
Other assets
|
6,699
|
|
6,758
|
|
||
Total prepaid expenses and other assets
|
70,247
|
|
69,567
|
|
||
Less: Long-term portion
|
18,102
|
|
20,901
|
|
||
Prepaid expenses and other current assets
|
$
|
52,145
|
|
$
|
48,666
|
|
(dollars in thousands)
|
September 30,
2016 |
|
December 31,
2015 |
|
||
Accrued bonuses
|
$
|
14,478
|
|
$
|
24,591
|
|
Accrued commissions and salaries
|
6,620
|
|
8,391
|
|
||
Taxes payable
|
3,131
|
|
3,923
|
|
||
Deferred rent liabilities
|
4,164
|
|
4,070
|
|
||
Lease incentive obligations
|
4,616
|
|
4,734
|
|
||
Unrecognized tax benefit
|
3,029
|
|
3,147
|
|
||
Customer credit balances
|
4,615
|
|
3,515
|
|
||
Accrued vacation costs
|
2,398
|
|
2,446
|
|
||
Accrued health care costs
|
2,049
|
|
2,356
|
|
||
Other liabilities
|
6,808
|
|
7,911
|
|
||
Total accrued expenses and other liabilities
|
51,908
|
|
65,084
|
|
||
Less: Long-term portion
|
7,467
|
|
7,623
|
|
||
Accrued expenses and other current liabilities
|
$
|
44,441
|
|
$
|
57,461
|
|
18
|
|
Third Quarter 2016 Form 10-Q
|
(dollars in thousands)
|
September 30,
2016 |
|
December 31,
2015 |
|
||
Subscriptions
|
$
|
143,462
|
|
$
|
122,524
|
|
Maintenance
|
80,536
|
|
85,901
|
|
||
Services
|
28,533
|
|
28,517
|
|
||
License fees and other
|
2,215
|
|
393
|
|
||
Total deferred revenue
|
254,746
|
|
237,335
|
|
||
Less: Long-term portion
|
6,594
|
|
7,119
|
|
||
Deferred revenue, current portion
|
$
|
248,152
|
|
$
|
230,216
|
|
|
Three months ended September 30,
|
|
|
Nine months ended
September 30, |
|
||||||||
(dollars in thousands)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||
Interest income
|
$
|
224
|
|
$
|
8
|
|
|
$
|
463
|
|
$
|
23
|
|
Loss on sale of business
|
—
|
|
—
|
|
|
—
|
|
(1,976
|
)
|
||||
Other (expense) income, net
|
(239
|
)
|
184
|
|
|
(648
|
)
|
584
|
|
||||
Other (expense) income, net
|
$
|
(15
|
)
|
$
|
192
|
|
|
$
|
(185
|
)
|
$
|
(1,369
|
)
|
8. Debt
|
|
Debt balance at
|
|
|
Weighted average
effective interest rate at
|
|
||||||
(dollars in thousands)
|
September 30,
2016 |
|
December 31,
2015 |
|
|
September 30,
2016 |
|
December 31,
2015 |
|
||
Credit facility:
|
|
|
|
|
|
||||||
Revolving credit loans
|
$
|
212,600
|
|
$
|
242,900
|
|
|
2.34
|
%
|
2.15
|
%
|
Term loans
|
164,063
|
|
167,344
|
|
|
2.58
|
%
|
2.51
|
%
|
||
Total debt
|
376,663
|
|
410,244
|
|
|
2.44
|
%
|
2.30
|
%
|
||
Less: Unamortized debt discount
|
1,646
|
|
2,157
|
|
|
|
|
||||
Less: Debt, current portion
|
4,375
|
|
4,375
|
|
|
2.34
|
%
|
2.11
|
%
|
||
Debt, net of current portion
|
$
|
370,642
|
|
$
|
403,712
|
|
|
2.44
|
%
|
2.30
|
%
|
Third Quarter 2016 Form 10-Q
|
|
19
|
Years ending December 31,
(dollars in thousands)
|
Annual maturities
|
|
|
2016 - remaining
|
$
|
1,094
|
|
2017
|
4,375
|
|
|
2018
|
4,375
|
|
|
2019
|
366,819
|
|
|
2020
|
—
|
|
|
Thereafter
|
—
|
|
|
Total required maturities
|
$
|
376,663
|
|
20
|
|
Third Quarter 2016 Form 10-Q
|
9. Derivative Instruments
|
(dollars in thousands)
|
Balance sheet location
|
September 30,
2016 |
|
December 31,
2015 |
|
||
Derivative instruments designated as hedging instruments:
|
|
|
|
||||
Interest rate swap, long-term portion
|
Other assets
|
$
|
—
|
|
$
|
406
|
|
Total derivative instruments designated as hedging instruments
|
|
$
|
—
|
|
$
|
406
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
|
||
Derivative instruments designated as hedging instruments:
|
|
|
|
||||
Interest rate swaps, current portion
|
Accrued expenses and
other current liabilities
|
$
|
—
|
|
$
|
2
|
|
Interest rate swaps, long-term portion
|
Other liabilities
|
654
|
|
436
|
|
||
Total derivative instruments designated as hedging instruments
|
|
$
|
654
|
|
$
|
438
|
|
|
Gain (loss) recognized
in accumulated other
comprehensive
loss as of
|
|
Location
of gain (loss)
reclassified from
accumulated other
comprehensive
loss into income
|
Gain (loss) reclassified from accumulated
other comprehensive loss into income
|
|
||||||
(dollars in thousands)
|
September 30,
2016 |
|
Three months ended
September 30, 2016 |
|
|
Nine months ended
September 30, 2016 |
|
||||
Interest rate swaps
|
$
|
(654
|
)
|
Interest expense
|
$
|
(265
|
)
|
|
$
|
(875
|
)
|
|
|
|
|
|
|
||||||
|
September 30,
2015 |
|
|
Three months ended
September 30, 2015 |
|
|
Nine months ended
September 30, 2015 |
|
|||
Interest rate swaps
|
$
|
(1,312
|
)
|
Interest expense
|
$
|
(373
|
)
|
|
$
|
(1,122
|
)
|
Third Quarter 2016 Form 10-Q
|
|
21
|
10. Commitments and Contingencies
|
22
|
|
Third Quarter 2016 Form 10-Q
|
Years ending December 31,
(dollars in thousands)
|
Operating leases
(1)
|
|
|
2016 – remaining
|
$
|
3,427
|
|
2017
|
12,531
|
|
|
2018
|
15,663
|
|
|
2019
|
15,954
|
|
|
2020
|
15,309
|
|
|
Thereafter
|
110,088
|
|
|
Total minimum lease payments
|
$
|
172,972
|
|
(1)
|
Our future minimum lease commitments related to operating leases do not include payments related to Phase Two of our New Headquarters Facility, as that option had not been exercised as of
September 30, 2016
.
|
Third Quarter 2016 Form 10-Q
|
|
23
|
11. Income Taxes
|
24
|
|
Third Quarter 2016 Form 10-Q
|
12. Stock-based Compensation
|
|
Three months ended September 30,
|
|
|
Nine months ended
September 30, |
|
||||||||
(dollars in thousands)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||
Included in cost of revenue:
|
|
|
|
|
|
||||||||
Cost of subscriptions
|
$
|
318
|
|
$
|
213
|
|
|
$
|
904
|
|
$
|
681
|
|
Cost of maintenance
|
137
|
|
107
|
|
|
391
|
|
353
|
|
||||
Cost of services
|
461
|
|
449
|
|
|
1,308
|
|
1,685
|
|
||||
Total included in cost of revenue
|
916
|
|
769
|
|
|
2,603
|
|
2,719
|
|
||||
Included in operating expenses:
|
|
|
|
|
|
||||||||
Sales, marketing and customer success
|
1,055
|
|
768
|
|
|
2,972
|
|
2,273
|
|
||||
Research and development
|
1,674
|
|
1,145
|
|
|
4,874
|
|
3,309
|
|
||||
General and administrative
|
5,173
|
|
3,804
|
|
|
14,556
|
|
9,598
|
|
||||
Total included in operating expenses
|
7,902
|
|
5,717
|
|
|
22,402
|
|
15,180
|
|
||||
Total stock-based compensation expense
|
$
|
8,818
|
|
$
|
6,486
|
|
|
$
|
25,005
|
|
$
|
17,899
|
|
13. Stockholders' Equity
|
Declaration Date
|
Dividend
per Share
|
|
Record Date
|
|
Payable Date
|
|
February 9, 2016
|
$
|
0.12
|
|
February 26
|
|
March 15
|
April 27, 2016
|
$
|
0.12
|
|
May 27
|
|
June 15
|
August 1, 2016
|
$
|
0.12
|
|
August 26
|
|
September 15
|
Third Quarter 2016 Form 10-Q
|
|
25
|
|
Three months ended September 30,
|
|
|
Nine months ended
September 30, |
|
||||||||
(dollars in thousands)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||
Accumulated other comprehensive loss, beginning of period
|
$
|
(1,640
|
)
|
$
|
(1,926
|
)
|
|
$
|
(825
|
)
|
$
|
(1,032
|
)
|
By component:
|
|
|
|
|
|
||||||||
Gains and losses on cash flow hedges:
|
|
|
|
|
|
||||||||
Accumulated other comprehensive loss balance, beginning of period
|
$
|
(806
|
)
|
$
|
(536
|
)
|
|
$
|
(19
|
)
|
$
|
(164
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax effects of $(161), $309, $589 and $831
|
248
|
|
(491
|
)
|
|
(909
|
)
|
(1,322
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss to interest expense
|
265
|
|
373
|
|
|
875
|
|
1,122
|
|
||||
Tax benefit included in provision for income taxes
|
(104
|
)
|
(144
|
)
|
|
(344
|
)
|
(434
|
)
|
||||
Total amounts reclassified from accumulated other comprehensive loss
|
161
|
|
229
|
|
|
531
|
|
688
|
|
||||
Net current-period other comprehensive income (loss)
|
409
|
|
(262
|
)
|
|
(378
|
)
|
(634
|
)
|
||||
Accumulated other comprehensive loss balance, end of period
|
$
|
(397
|
)
|
$
|
(798
|
)
|
|
$
|
(397
|
)
|
$
|
(798
|
)
|
Foreign currency translation adjustment:
|
|
|
|
|
|
||||||||
Accumulated other comprehensive loss balance, beginning of period
|
$
|
(834
|
)
|
$
|
(1,390
|
)
|
|
$
|
(806
|
)
|
$
|
(868
|
)
|
Translation adjustments
|
289
|
|
168
|
|
|
261
|
|
(354
|
)
|
||||
Accumulated other comprehensive loss balance, end of period
|
(545
|
)
|
(1,222
|
)
|
|
(545
|
)
|
(1,222
|
)
|
||||
Accumulated other comprehensive loss, end of period
|
$
|
(942
|
)
|
$
|
(2,020
|
)
|
|
$
|
(942
|
)
|
$
|
(2,020
|
)
|
14. Segment Information
|
•
|
The GMBU is focused on marketing, sales, delivery and support to all emerging and mid-sized prospects and customers in North America;
|
•
|
The ECBU is focused on marketing, sales, delivery and support to all large and/or strategic prospects and customers in North America; and
|
•
|
The IBU is focused on marketing, sales, delivery and support to all prospects and customers outside of North America.
|
26
|
|
Third Quarter 2016 Form 10-Q
|
|
Three months ended September 30,
|
|
|
Nine months ended
September 30, |
|
||||||||
(dollars in thousands)
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
||||
Revenue by segment:
|
|
|
|
|
|
||||||||
GMBU
|
$
|
97,621
|
|
$
|
78,244
|
|
|
$
|
279,543
|
|
$
|
224,311
|
|
ECBU
|
74,351
|
|
69,326
|
|
|
220,887
|
|
205,625
|
|
||||
IBU
|
11,030
|
|
11,181
|
|
|
31,926
|
|
31,995
|
|
||||
Other
(1)
|
61
|
|
60
|
|
|
154
|
|
132
|
|
||||
Total revenue
|
$
|
183,063
|
|
$
|
158,811
|
|
|
$
|
532,510
|
|
$
|
462,063
|
|
Segment operating income
(2)
:
|
|
|
|
|
|
||||||||
GMBU
|
$
|
46,540
|
|
$
|
40,718
|
|
|
$
|
134,408
|
|
$
|
114,719
|
|
ECBU
|
38,696
|
|
33,568
|
|
|
113,186
|
|
99,522
|
|
||||
IBU
|
1,064
|
|
2,431
|
|
|
3,126
|
|
5,823
|
|
||||
Other
(1)
|
(157
|
)
|
(219
|
)
|
|
(109
|
)
|
(276
|
)
|
||||
|
86,143
|
|
76,498
|
|
|
250,611
|
|
219,788
|
|
||||
Less:
|
|
|
|
|
|
||||||||
Corporate unallocated costs
(3)
|
(53,236
|
)
|
(47,975
|
)
|
|
(156,013
|
)
|
(141,162
|
)
|
||||
Stock-based compensation costs
|
(8,818
|
)
|
(6,486
|
)
|
|
(25,005
|
)
|
(17,899
|
)
|
||||
Amortization expense
|
(10,549
|
)
|
(8,069
|
)
|
|
(31,817
|
)
|
(24,286
|
)
|
||||
Interest expense
|
(2,641
|
)
|
(1,816
|
)
|
|
(8,037
|
)
|
(5,375
|
)
|
||||
Other (expense) income, net
|
(15
|
)
|
192
|
|
|
(185
|
)
|
(1,369
|
)
|
||||
Income before provision for income taxes
|
$
|
10,884
|
|
$
|
12,344
|
|
|
$
|
29,554
|
|
$
|
29,697
|
|
(1)
|
Other includes revenue and the related costs from the sale of solutions and services not directly attributable to a reportable segment.
|
(2)
|
Segment operating income includes direct, controllable costs related to the sale of solutions and services by the reportable segment.
|
(3)
|
Corporate unallocated costs include research and development, depreciation expense, and certain corporate sales, marketing, general and administrative expenses.
|
Third Quarter 2016 Form 10-Q
|
|
27
|
Executive Summary
|
1.
|
Integrated and Open Solutions in the Cloud
|
28
|
|
Third Quarter 2016 Form 10-Q
|
2.
|
Drive Sales Effectiveness
|
3.
|
Expand TAM into Near Adjacencies through Acquisitions and Investments
|
4.
|
Execute our 3-Year Margin Improvement Plan
|
5.
|
Streamline Operations
|
Third Quarter 2016 Form 10-Q
|
|
29
|
Total revenue
|
|
|
|
|
|
|
|
||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
(1)
|
|
2015
|
|
Change
|
|
|
2016
(1)
|
|
2015
|
|
Change
|
|
||||
Total revenue
|
$
|
183.1
|
|
$
|
158.8
|
|
15.3
|
%
|
|
$
|
532.5
|
|
$
|
462.1
|
|
15.2
|
%
|
(1)
|
Included in total revenue for the
three and nine months ended
September 30, 2016
was
$10.3 million
and
$27.7 million
attributable to solutions historically sold by Smart Tuition.
|
(1)
|
Included in income from operations for the
three and nine months ended
September 30, 2016
was
$1.0 million
and
$2.8 million
attributable to the inclusion of Smart Tuition.
|
30
|
|
Third Quarter 2016 Form 10-Q
|
Results of Operations
|
Revenue by segment
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
(1)
|
|
2015
|
|
Change
|
|
|
2016
(1)
|
|
2015
|
|
Change
|
|
||||
GMBU
|
$
|
97.6
|
|
$
|
78.2
|
|
24.8
|
%
|
|
$
|
279.5
|
|
$
|
224.3
|
|
24.6
|
%
|
ECBU
|
74.4
|
|
69.3
|
|
7.2
|
%
|
|
220.9
|
|
205.6
|
|
7.4
|
%
|
||||
IBU
|
11.0
|
|
11.2
|
|
(1.4
|
)%
|
|
31.9
|
|
32.0
|
|
(0.2
|
)%
|
||||
Total revenue
(2)
|
$
|
183.1
|
|
$
|
158.8
|
|
15.3
|
%
|
|
$
|
532.5
|
|
$
|
462.1
|
|
15.2
|
%
|
(1)
|
Included in GMBU revenue and total revenue for the
three and nine months ended
September 30, 2016
was
$10.3 million
and
$27.7 million
, respectively, attributable to the inclusion of Smart Tuition.
|
(2)
|
The individual amounts for each year may not sum to total revenue due to rounding.
|
Third Quarter 2016 Form 10-Q
|
|
31
|
GMBU
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
(1)
|
|
2015
|
|
Change
|
|
|
2016
(1)
|
|
2015
|
|
Change
|
|
||||
GMBU revenue
|
$
|
97.6
|
|
$
|
78.2
|
|
24.8
|
%
|
|
$
|
279.5
|
|
$
|
224.3
|
|
24.6
|
%
|
% of total revenue
|
53.3
|
%
|
49.3
|
%
|
|
|
52.5
|
%
|
48.5
|
%
|
|
(1)
|
Included in GMBU revenue for the
three and nine months ended
September 30, 2016
was
$10.3 million
and
$27.7 million
, respectively, attributable to solutions historically sold by Smart Tuition.
|
ECBU
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
ECBU revenue
|
$
|
74.4
|
|
$
|
69.3
|
|
7.2
|
%
|
|
$
|
220.9
|
|
$
|
205.6
|
|
7.4
|
%
|
% of total revenue
|
40.6
|
%
|
43.7
|
%
|
|
|
41.5
|
%
|
44.5
|
%
|
|
IBU
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
IBU revenue
|
$
|
11.0
|
|
$
|
11.2
|
|
(1.4
|
)%
|
|
$
|
31.9
|
|
$
|
32.0
|
|
(0.2
|
)%
|
% of total revenue
|
6.0
|
%
|
7.0
|
%
|
|
|
6.0
|
%
|
6.9
|
%
|
|
32
|
|
Third Quarter 2016 Form 10-Q
|
Subscriptions
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
(1)
|
|
2015
|
|
Change
|
|
|
2016
(2)
|
|
2015
|
|
Change
|
|
||||
Subscriptions revenue
|
$
|
105.4
|
|
$
|
80.9
|
|
30.3
|
%
|
|
$
|
306.3
|
|
$
|
233.4
|
|
31.2
|
%
|
Cost of subscriptions
|
51.9
|
|
39.5
|
|
31.6
|
%
|
|
153.8
|
|
115.1
|
|
33.6
|
%
|
||||
Subscriptions gross profit
(3)
|
$
|
53.5
|
|
$
|
41.4
|
|
29.2
|
%
|
|
$
|
152.6
|
|
$
|
118.4
|
|
28.9
|
%
|
Subscriptions gross margin
|
50.7
|
%
|
51.2
|
%
|
|
|
49.8
|
%
|
50.7
|
%
|
|
(1)
|
Included in subscriptions revenue and cost of subscriptions for the three months ended
September 30, 2016
was
$10.3 million
and
$6.3 million
, respectively, attributable to solutions historically sold by Smart Tuition.
|
(2)
|
Included in subscriptions revenue and cost of subscriptions for the
nine
months ended
September 30, 2016
was
$27.3 million
and
$16.2 million
, respectively, attributable to the inclusion of Smart Tuition.
|
(3)
|
The individual amounts for each year may not sum to subscriptions gross profit due to rounding.
|
Third Quarter 2016 Form 10-Q
|
|
33
|
Maintenance
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
Maintenance revenue
|
$
|
36.4
|
|
$
|
38.2
|
|
(4.7
|
)%
|
|
$
|
111.0
|
|
$
|
115.7
|
|
(4.1
|
)%
|
Cost of maintenance
|
5.5
|
|
6.7
|
|
(17.5
|
)%
|
|
16.5
|
|
21.2
|
|
(21.9
|
)%
|
||||
Maintenance gross profit
(1)
|
$
|
30.9
|
|
$
|
31.5
|
|
(2.0
|
)%
|
|
$
|
94.5
|
|
$
|
94.6
|
|
(0.1
|
)%
|
Maintenance gross margin
|
84.8
|
%
|
82.4
|
%
|
|
|
85.1
|
%
|
81.7
|
%
|
|
(1)
|
The individual amounts for each year may not sum to maintenance gross profit due to rounding.
|
34
|
|
Third Quarter 2016 Form 10-Q
|
Services
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
(1)
|
|
2015
|
|
Change
|
|
|
2016
(1)
|
|
2015
|
|
Change
|
|
||||
Services revenue
|
$
|
36.6
|
|
$
|
35.9
|
|
2.0
|
%
|
|
$
|
104.4
|
|
$
|
100.9
|
|
3.5
|
%
|
Cost of services
|
24.1
|
|
26.2
|
|
(8.1
|
)%
|
|
73.1
|
|
79.1
|
|
(7.6
|
)%
|
||||
Services gross profit
(2)
|
$
|
12.5
|
|
$
|
9.7
|
|
29.3
|
%
|
|
$
|
31.3
|
|
$
|
21.8
|
|
43.9
|
%
|
Services gross margin
|
34.2
|
%
|
26.9
|
%
|
|
|
30.0
|
%
|
21.6
|
%
|
|
(1)
|
Included in services revenue and cost of services for the
three and nine months ended
September 30, 2016
were insignificant amounts attributable to the inclusion of Smart Tuition.
|
(2)
|
The individual amounts for each year may not sum to services gross profit due to rounding.
|
Third Quarter 2016 Form 10-Q
|
|
35
|
License fees and other
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
License fees and other revenue
|
$
|
4.6
|
|
$
|
3.8
|
|
21.3
|
%
|
|
$
|
10.7
|
|
$
|
12.0
|
|
(10.9
|
)%
|
Cost of license fees and other
|
1.7
|
|
1.7
|
|
(0.2
|
)%
|
|
3.4
|
|
4.1
|
|
(17.0
|
)%
|
||||
License fees and other gross profit
(1)
|
$
|
2.9
|
|
$
|
2.1
|
|
39.5
|
%
|
|
$
|
7.4
|
|
$
|
8.0
|
|
(7.8
|
)%
|
License fees and other gross margin
|
62.2
|
%
|
54.0
|
%
|
|
|
68.6
|
%
|
66.3
|
%
|
|
(1)
|
The individual amounts for each year may not sum to license fees and other gross profit due to rounding.
|
36
|
|
Third Quarter 2016 Form 10-Q
|
Sales, marketing, and customer success
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
Sales, marketing and customer success expense
|
$
|
40.7
|
|
$
|
31.1
|
|
30.7
|
%
|
|
$
|
115.7
|
|
$
|
89.4
|
|
29.4
|
%
|
% of total revenue
|
22.2
|
%
|
19.6
|
%
|
|
|
21.7
|
%
|
19.4
|
%
|
|
Research and development
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
Research and development expense
|
$
|
22.5
|
|
$
|
20.6
|
|
9.5
|
%
|
|
$
|
68.0
|
|
$
|
62.0
|
|
9.6
|
%
|
% of total revenue
|
12.3
|
%
|
12.9
|
%
|
|
|
12.8
|
%
|
13.4
|
%
|
|
Third Quarter 2016 Form 10-Q
|
|
37
|
General and administrative
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
General and administrative expense
|
$
|
22.3
|
|
$
|
18.4
|
|
21.0
|
%
|
|
$
|
62.1
|
|
$
|
53.2
|
|
16.6
|
%
|
% of total revenue
|
12.2
|
%
|
11.6
|
%
|
|
|
11.7
|
%
|
11.5
|
%
|
|
Interest expense
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
Interest expense
|
$
|
2.6
|
|
$
|
1.8
|
|
45.4
|
%
|
|
$
|
8.0
|
|
$
|
5.4
|
|
49.5
|
%
|
% of total revenue
|
1.4
|
%
|
1.1
|
%
|
|
|
1.5
|
%
|
1.2
|
%
|
|
38
|
|
Third Quarter 2016 Form 10-Q
|
(dollars in millions)
|
Timing of recognition
|
September 30,
2016 |
|
Change
|
|
|
December 31,
2015 |
|
||
Subscriptions
|
Over the period billed in advance, generally one year
|
$
|
143.5
|
|
17.1
|
%
|
|
$
|
122.5
|
|
Maintenance
|
Over the period billed in advance, generally one year
|
80.5
|
|
(6.2
|
)%
|
|
85.9
|
|
||
Services
|
As services are delivered
|
28.5
|
|
0.1
|
%
|
|
28.5
|
|
||
License fees and other
|
Upon delivery of the solution or service
|
2.2
|
|
463.6
|
%
|
|
0.4
|
|
||
Total deferred revenue
(1)
|
|
254.7
|
|
7.3
|
%
|
|
237.3
|
|
||
Less: Long-term portion
|
|
6.6
|
|
(7.4
|
)%
|
|
7.1
|
|
||
Current portion
(1)
|
|
$
|
248.2
|
|
7.8
|
%
|
|
$
|
230.2
|
|
(1)
|
The individual amounts for each year may not sum to total deferred revenue or current portion of deferred revenue due to rounding.
|
Income tax provision
|
|
|
|
|
|
|
|||||||||||
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
Change
|
|
|||||
Income tax provision
|
$
|
2.0
|
|
$
|
4.4
|
|
(56.0
|
)%
|
|
$
|
5.3
|
|
$
|
10.5
|
|
(49.1
|
)%
|
Effective income tax rate
|
17.9
|
%
|
35.9
|
%
|
|
|
18.0
|
%
|
35.2
|
%
|
|
Third Quarter 2016 Form 10-Q
|
|
39
|
40
|
|
Third Quarter 2016 Form 10-Q
|
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
GAAP Revenue
|
$
|
183.1
|
|
$
|
158.8
|
|
15.3
|
%
|
|
$
|
532.5
|
|
$
|
462.1
|
|
15.2
|
%
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
||||||||||
Add: Acquisition-related deferred revenue write-down
|
—
|
|
1.1
|
|
(100.0
|
)%
|
|
3.6
|
|
7.1
|
|
(49.0
|
)%
|
||||
Non-GAAP revenue
(1)
|
$
|
183.1
|
|
$
|
159.9
|
|
14.5
|
%
|
|
$
|
536.1
|
|
$
|
469.2
|
|
14.3
|
%
|
|
|
|
|
|
|
|
|
||||||||||
GAAP gross profit
|
$
|
99.7
|
|
$
|
84.6
|
|
17.9
|
%
|
|
$
|
285.7
|
|
$
|
242.6
|
|
17.7
|
%
|
GAAP gross margin
|
54.5
|
%
|
53.3
|
%
|
|
|
53.7
|
%
|
52.5
|
%
|
|
||||||
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
||||||||||
Add: Acquisition-related deferred revenue write-down
|
—
|
|
1.1
|
|
(100.0
|
)%
|
|
3.6
|
|
7.1
|
|
(49.0
|
)%
|
||||
Add: Stock-based compensation expense
|
0.9
|
|
0.8
|
|
19.1
|
%
|
|
2.6
|
|
2.7
|
|
(4.3
|
)%
|
||||
Add: Amortization of intangibles from business combinations
|
9.9
|
|
7.5
|
|
30.7
|
%
|
|
29.7
|
|
22.8
|
|
30.4
|
%
|
||||
Add: Employee severance
|
—
|
|
0.5
|
|
(96.6
|
)%
|
|
0.2
|
|
1.5
|
|
(89.1
|
)%
|
||||
Subtotal
(1)
|
10.8
|
|
10.0
|
|
8.3
|
%
|
|
36.1
|
|
34.1
|
|
5.9
|
%
|
||||
Non-GAAP gross profit
(1)
|
$
|
110.5
|
|
$
|
94.6
|
|
16.8
|
%
|
|
$
|
321.8
|
|
$
|
276.7
|
|
16.3
|
%
|
Non-GAAP gross margin
|
60.4
|
%
|
59.2
|
%
|
|
|
60.0
|
%
|
59.0
|
%
|
|
(1)
|
The individual amounts for each year may not sum to non-GAAP revenue, subtotal or non-GAAP gross profit due to rounding.
|
|
Three months ended
September 30, |
|
|
Nine months ended
September 30, |
|
||||||||||||
(dollars in millions, except per share amounts)
|
2016
|
|
2015
|
|
Change
|
|
|
2016
|
|
2015
|
|
Change
|
|
||||
GAAP income from operations
|
$
|
13.5
|
|
$
|
14.0
|
|
(3.1
|
)%
|
|
$
|
37.8
|
|
$
|
36.4
|
|
3.7
|
%
|
GAAP operating margin
|
7.4
|
%
|
8.8
|
%
|
|
|
7.1
|
%
|
7.9
|
%
|
|
||||||
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
||||||||||
Add: Acquisition-related deferred revenue write-down
|
—
|
|
1.1
|
|
(100.0
|
)%
|
|
3.6
|
|
7.1
|
|
(49.0
|
)%
|
||||
Add: Stock-based compensation expense
|
8.8
|
|
6.5
|
|
36.0
|
%
|
|
25.0
|
|
17.9
|
|
39.7
|
%
|
||||
Add: Amortization of intangibles from business combinations
|
10.5
|
|
8.1
|
|
30.7
|
%
|
|
31.8
|
|
24.3
|
|
31.0
|
%
|
||||
Add: Employee severance
|
0.1
|
|
0.6
|
|
(88.6
|
)%
|
|
0.5
|
|
2.2
|
|
(78.6
|
)%
|
||||
Add: Acquisition-related integration costs
|
0.9
|
|
0.1
|
|
1,630.2
|
%
|
|
1.4
|
|
0.7
|
|
95.7
|
%
|
||||
Add: Acquisition-related expenses
|
0.2
|
|
0.3
|
|
(40.9
|
)%
|
|
0.3
|
|
1.0
|
|
(74.6
|
)%
|
||||
Subtotal
(1)
|
20.5
|
|
16.6
|
|
23.4
|
%
|
|
62.6
|
|
53.3
|
|
17.5
|
%
|
||||
Non-GAAP income from operations
(1)
|
$
|
34.0
|
|
$
|
30.6
|
|
11.3
|
%
|
|
$
|
100.4
|
|
$
|
89.7
|
|
11.9
|
%
|
Non-GAAP operating margin
|
18.6
|
%
|
19.1
|
%
|
|
|
18.7
|
%
|
19.1
|
%
|
|
||||||
|
|
|
|
|
|
|
|
||||||||||
GAAP net income
|
$
|
8.9
|
|
$
|
7.9
|
|
12.9
|
%
|
|
$
|
24.2
|
|
$
|
19.2
|
|
26.0
|
%
|
Shares used in computing GAAP diluted earnings per share
|
47,394,106
|
|
46,596,714
|
|
1.7
|
%
|
|
47,268,469
|
|
46,403,196
|
|
1.9
|
%
|
||||
GAAP diluted earnings per share
|
$
|
0.19
|
|
$
|
0.17
|
|
11.8
|
%
|
|
$
|
0.51
|
|
$
|
0.41
|
|
24.4
|
%
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
||||||||||
Add: Total Non-GAAP adjustments affecting income from operations
|
20.5
|
|
16.6
|
|
23.4
|
%
|
|
62.6
|
|
53.3
|
|
17.5
|
%
|
||||
Add: Loss on sale of business
|
—
|
|
—
|
|
—
|
%
|
|
—
|
|
2.0
|
|
(100.0
|
)%
|
||||
Less: Tax impact related to Non-GAAP adjustments
|
(8.1
|
)
|
(6.9
|
)
|
18.0
|
%
|
|
(24.2
|
)
|
(22.7
|
)
|
6.6
|
%
|
||||
Non-GAAP net income
(1)
|
$
|
21.3
|
|
$
|
17.7
|
|
20.8
|
%
|
|
$
|
62.7
|
|
$
|
51.8
|
|
20.9
|
%
|
|
|
|
|
|
|
|
|
||||||||||
Shares used in computing Non-GAAP diluted earnings per share
|
47,394,106
|
|
46,596,714
|
|
1.7
|
%
|
|
47,268,469
|
|
46,403,196
|
|
1.9
|
%
|
||||
Non-GAAP diluted earnings per share
|
$
|
0.45
|
|
$
|
0.38
|
|
18.4
|
%
|
|
$
|
1.33
|
|
$
|
1.12
|
|
18.8
|
%
|
(1)
|
The individual amounts for each year may not sum to subtotal, non-GAAP income from operations or non-GAAP net income due to rounding.
|
Third Quarter 2016 Form 10-Q
|
|
41
|
42
|
|
Third Quarter 2016 Form 10-Q
|
(dollars in millions)
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
||||||||
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|||||
GAAP revenue
|
$
|
183.1
|
|
$
|
158.8
|
|
|
$
|
532.5
|
|
$
|
462.1
|
|
GAAP revenue growth
|
15.3
|
%
|
|
|
15.2
|
%
|
|
||||||
Add: Non-GAAP acquisition-related revenue
(1)
|
—
|
|
10.5
|
|
|
3.6
|
|
33.2
|
|
||||
Less: Revenue from divested businesses
(2)
|
—
|
|
—
|
|
|
—
|
|
(0.6
|
)
|
||||
Total Non-GAAP adjustments
|
—
|
|
10.5
|
|
|
3.6
|
|
32.7
|
|
||||
Non-GAAP revenue
|
$
|
183.1
|
|
$
|
169.3
|
|
|
$
|
536.1
|
|
$
|
494.7
|
|
Non-GAAP organic revenue growth
|
8.1
|
%
|
|
|
8.4
|
%
|
|
||||||
|
|
|
|
|
|
||||||||
Non-GAAP revenue
(3)
|
$
|
183.1
|
|
$
|
169.3
|
|
|
$
|
536.1
|
|
$
|
494.7
|
|
Foreign currency impact on Non-GAAP organic revenue
(4)
|
1.0
|
|
—
|
|
|
3.4
|
|
—
|
|
||||
Non-GAAP revenue on constant currency basis
(4)
|
$
|
184.0
|
|
$
|
169.3
|
|
|
$
|
539.5
|
|
$
|
494.7
|
|
Non-GAAP organic revenue growth on constant currency basis
|
8.7
|
%
|
|
|
9.1
|
%
|
|
||||||
|
|
|
|
|
|
||||||||
GAAP subscriptions revenue
|
$
|
105.4
|
|
$
|
80.9
|
|
|
$
|
306.3
|
|
$
|
233.4
|
|
GAAP maintenance revenue
|
$
|
36.4
|
|
$
|
38.2
|
|
|
111.0
|
|
115.7
|
|
||
GAAP recurring revenue
|
$
|
141.9
|
|
$
|
119.1
|
|
|
417.3
|
|
349.2
|
|
||
GAAP recurring revenue growth
|
19.1
|
%
|
|
|
19.5
|
%
|
|
||||||
Add: Non-GAAP acquisition-related revenue
(1)
|
—
|
|
10.3
|
|
|
3.6
|
|
32.3
|
|
||||
Less: Revenue from divested businesses
(2)
|
—
|
|
—
|
|
|
—
|
|
(0.4
|
)
|
||||
Total Non-GAAP adjustments
|
—
|
|
10.3
|
|
|
3.6
|
|
31.9
|
|
||||
Non-GAAP recurring revenue
|
$
|
141.9
|
|
$
|
129.4
|
|
|
$
|
421.0
|
|
$
|
381.1
|
|
Non-GAAP organic recurring revenue growth
|
9.6
|
%
|
|
|
10.5
|
%
|
|
(1)
|
Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, non-GAAP acquisition-related revenue reflects presentation of full-year incremental non-GAAP revenue derived from such companies, as if they were combined throughout the prior period, and it includes the non-GAAP revenue from the acquisition-related deferred revenue write-down attributable to those companies.
|
(2)
|
For businesses divested in the prior fiscal year, non-GAAP organic revenue growth excludes revenue associated with divested businesses. The exclusion of the prior period revenue is to present the results of the divested business with the results of the combined company for the same period of time in both the prior and current periods.
|
(3)
|
Non-GAAP revenue for the prior year periods presented herein may not agree to non-GAAP revenue presented in the respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth is calculated.
|
(4)
|
To determine non-GAAP organic revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign currencies creating the impact are the Canadian Dollar, EURO, British Pound and Australian Dollar.
|
Third Quarter 2016 Form 10-Q
|
|
43
|
Liquidity and Capital Resources
|
(dollars in millions)
|
September 30,
2016 |
|
Change
|
|
|
December 31,
2015 |
|
||
Cash and cash equivalents
|
$
|
16.5
|
|
7.2
|
%
|
|
$
|
15.4
|
|
Property and equipment, net
|
52.5
|
|
(0.4
|
)%
|
|
52.7
|
|
||
Software development costs, net
|
32.5
|
|
66.4
|
%
|
|
19.6
|
|
||
Total carrying value of debt
|
375.0
|
|
(8.1
|
)%
|
|
408.1
|
|
||
Working capital
|
(161.9
|
)
|
3.2
|
%
|
|
(167.2
|
)
|
||
Working capital excluding deferred revenue
|
86.3
|
|
36.9
|
%
|
|
63.0
|
|
|
Nine months ended September 30,
|
||||||||
(dollars in millions)
|
2016
|
|
Change
|
|
|
2015
|
|
||
Net cash provided by operating activities
|
$
|
100.1
|
|
11.9
|
%
|
|
$
|
89.5
|
|
Net cash used in investing activities
|
(37.9
|
)
|
43.2
|
%
|
|
(26.5
|
)
|
||
Net cash used in financing activities
|
(61.2
|
)
|
3.7
|
%
|
|
(59.0
|
)
|
44
|
|
Third Quarter 2016 Form 10-Q
|
•
|
an increase in current period bonus payments as a result of an increase in amounts accrued as of December 31, 2015 for over-performance against 2015 targets;
|
•
|
the use of and reduction in amounts prepaid for incomes taxes;
|
•
|
an increase in customer billings related to transactional revenue that is not offset with a corresponding increase in deferred revenue; and
|
•
|
an increase in trade accounts payable during the nine months ended September 30, 2015 that did not recur during the same period in 2016.
|
Third Quarter 2016 Form 10-Q
|
|
45
|
Financial Covenant
|
Requirement
|
Ratio as of September 30, 2016
|
Net Leverage Ratio
|
≤ 3.50 to 1.00
|
2.39 to 1.00
|
Interest Coverage Ratio
|
≥ 2.50 to 1.00
|
14.84 to 1.00
|
|
Payments due by period
|
||||||||||||||
(in millions)
|
Total
|
|
Less than 1 year
|
|
1-3 years
|
|
3-5 years
|
|
More than 5 years
|
|
|||||
Recorded contractual obligations:
|
|
|
|
|
|
||||||||||
Debt
(1)
|
$
|
376.7
|
|
$
|
4.4
|
|
$
|
372.3
|
|
$
|
—
|
|
$
|
—
|
|
Interest payments on debt
(2)
|
0.7
|
|
0.6
|
|
0.1
|
|
—
|
|
—
|
|
|||||
|
|
|
|
|
|
||||||||||
Unrecorded contractual obligations:
|
|
|
|
|
|
||||||||||
Operating leases
(3)
|
172.9
|
|
12.8
|
|
30.7
|
|
30.2
|
|
99.2
|
|
|||||
Interest payments on debt
(4)
|
20.7
|
|
8.6
|
|
12.1
|
|
—
|
|
—
|
|
|||||
Purchase obligations
(5)
|
35.7
|
|
17.0
|
|
16.7
|
|
2.0
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
606.7
|
|
$
|
43.4
|
|
$
|
431.9
|
|
$
|
32.2
|
|
$
|
99.2
|
|
(1)
|
Represents principal payments only, under the following assumptions: (i) that the amounts outstanding under the 2014 Credit Facility at
September 30, 2016
will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2014 Revolving Facility for the purposes of determining minimum commitment amounts.
|
(2)
|
Represents interest payment obligations related to our interest rate swap agreements.
|
(3)
|
Our commitments related to operating leases have not been reduced by incentive payments and reimbursement of leasehold improvements.
|
(4)
|
The actual interest expense recognized in our consolidated statements of comprehensive income will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions described in (1) above.
|
(5)
|
We utilize third-party technology in conjunction with our solutions and services, with contractual obligations varying in length from
one
to
four
years. In certain cases, these arrangements require a minimum annual purchase commitment by us.
|
46
|
|
Third Quarter 2016 Form 10-Q
|
Off-Balance Sheet Arrangements
|
Foreign Currency Exchange Rates
|
Third Quarter 2016 Form 10-Q
|
|
47
|
Inflation
|
Critical Accounting Policies and Estimates
|
Recently Issued Accounting Pronouncements
|
Interest Rate Risk
|
Foreign Currency Risk
|
48
|
|
Third Quarter 2016 Form 10-Q
|
Evaluation of Disclosure Controls and Procedures
|
Changes in Internal Control Over Financial Reporting
|
Third Quarter 2016 Form 10-Q
|
|
49
|
|
|
PART II. OTHER INFORMATION
|
Issuer Purchases of Equity Securities
|
Period
|
Total
number
of shares
purchased
|
|
|
Average
price
paid
per
share
|
|
|
Total number
of shares
purchased as
part of
publicly
announced
plans or
programs
(1)
|
|
|
Approximate
dollar value
of shares
that may yet
be purchased
under the
plans or programs
(in thousands)
|
|
||
Beginning balance, July 1, 2016
|
|
|
|
|
|
|
$
|
50,000
|
|
||||
July 1, 2016 through July 31, 2016
|
13,637
|
|
|
$
|
68.67
|
|
|
—
|
|
|
50,000
|
|
|
August 1, 2016 through August 31, 2016
|
22,636
|
|
|
67.25
|
|
|
—
|
|
|
50,000
|
|
||
September 1, 2016 through September 30, 2016
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
||
Total
|
36,273
|
|
|
$
|
67.78
|
|
|
—
|
|
|
$
|
50,000
|
|
(1)
|
In August 2010, our Board of Directors approved a stock repurchase program that authorized us to purchase up to $50.0 million of our outstanding shares of common stock. We have not made any repurchases under the program to date, and the program does not have an expiration date.
|
50
|
|
Third Quarter 2016 Form 10-Q
|
|
|
|
|
Filed In
|
||||||
Exhibit Number
|
|
Description of Document
|
|
Filed Herewith
|
|
Form
|
|
Exhibit Number
|
|
Filing Date
|
10.87
|
|
First Amendment to Lease Agreement, dated as of August 22, 2016, between HPBB1, LLC and Blackbaud, Inc.
|
|
X
|
|
|
|
|
|
|
31.1
|
|
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
X
|
|
|
|
|
|
|
31.2
|
|
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
X
|
|
|
|
|
|
|
32.1
|
|
Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
X
|
|
|
|
|
|
|
32.2
|
|
Certification by the Chief Financial Officer pursuant to 18 U.S.C. 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
|
|
|
|
|
|
|
Third Quarter 2016 Form 10-Q
|
|
51
|
|
|
SIGNATURES
|
|
|
BLACKBAUD, INC.
|
|
|
|
|
|
Date:
|
November 4, 2016
|
By:
|
/s/ Michael P. Gianoni
|
|
|
|
Michael P. Gianoni
|
|
|
|
President and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
Date:
|
November 4, 2016
|
By:
|
/s/ Anthony W. Boor
|
|
|
|
Anthony W. Boor
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
52
|
|
Third Quarter 2016 Form 10-Q
|
|
|
LANDLORD:
|
|
||
/s/ Jeff Mixson
|
|
|
|
||
Witness
|
|
HPBB1, LLC
|
|
||
|
|
a Georgia limited liability company
|
|
||
8/29/16
|
|
|
|
||
Date
|
|
By:
|
/s/ John R. Holder
|
|
|
|
|
|
John R. Holder
|
|
|
|
|
|
Managing Member
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
TENANT:
|
|
||
/s/ Kimberly Perry
|
|
|
|
||
Witness
|
|
BLACKBAUD, INC.,
|
|
||
|
|
a Delaware corporation
|
|
||
September 6, 2016
|
|
|
|
||
Date
|
|
By:
|
/s/ Michael Gianoni
|
|
|
|
|
|
Michael Gianoni
|
|
|
|
|
|
President and Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Blackbaud, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 4, 2016
|
By:
|
|
/s/ Michael P. Gianoni
|
|
|
|
|
Michael P. Gianoni
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Blackbaud, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
November 4, 2016
|
By:
|
|
/s/ Anthony W. Boor
|
|
|
|
|
Anthony W. Boor
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial and Accounting Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 4, 2016
|
By:
|
|
/s/ Michael P. Gianoni
|
|
|
|
|
Michael P. Gianoni
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 4, 2016
|
By:
|
|
/s/ Anthony W. Boor
|
|
|
|
|
Anthony W. Boor
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial and Accounting Officer)
|