|
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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|
For the quarterly period ended June 30, 2017
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OR
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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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|
|
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For the transition period from ________________ to ________________
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Delaware
|
|
77-0629474
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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3000 Clearview Way
San Mateo, California |
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94402
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(Address of principal executive offices)
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(Zip Code)
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Page
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PART I. FINANCIAL INFORMATION
|
||
Item 1.
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Financial Statements:
|
|
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
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PART II. OTHER INFORMATION
|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
|
||
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(in thousands, except par values)
|
June 30,
2017 |
|
December 31,
2016 |
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
149,755
|
|
|
$
|
192,114
|
|
Marketable securities
|
—
|
|
|
25,839
|
|
||
Accounts receivable, net
|
95,872
|
|
|
164,553
|
|
||
Inventory
|
126,708
|
|
|
167,192
|
|
||
Prepaid expenses and other current assets
|
29,515
|
|
|
38,115
|
|
||
Total current assets
|
401,850
|
|
|
587,813
|
|
||
Property and equipment, net
|
71,833
|
|
|
76,509
|
|
||
Intangible assets, net
|
29,001
|
|
|
33,530
|
|
||
Goodwill
|
146,459
|
|
|
146,459
|
|
||
Other long-term assets
|
72,828
|
|
|
78,329
|
|
||
Total assets
|
$
|
721,971
|
|
|
$
|
922,640
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
76,208
|
|
|
$
|
205,028
|
|
Accrued liabilities
|
151,317
|
|
|
211,323
|
|
||
Deferred revenue
|
15,036
|
|
|
14,388
|
|
||
Total current liabilities
|
242,561
|
|
|
430,739
|
|
||
Long-term taxes payable
|
20,865
|
|
|
26,386
|
|
||
Long-term debt
|
125,817
|
|
|
—
|
|
||
Other long-term liabilities
|
19,906
|
|
|
18,570
|
|
||
Total liabilities
|
409,149
|
|
|
475,695
|
|
||
|
|
|
|
||||
Commitments, contingencies and guarantees (Note 8)
|
|
|
|
||||
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.0001 par value, 5,000 shares authorized; none issued
|
—
|
|
|
—
|
|
||
Common stock and additional paid-in capital, $0.0001 par value, 500,000 Class A shares authorized, 98,766 and 104,647 shares issued and outstanding, respectively; 150,000 Class B shares authorized, 36,867 and 36,712 shares issued and outstanding, respectively
|
827,382
|
|
|
757,226
|
|
||
Treasury stock, at cost, 10,710 and 1,545 shares, respectively
|
(113,613
|
)
|
|
(35,613
|
)
|
||
Accumulated deficit
|
(400,947
|
)
|
|
(274,668
|
)
|
||
Total stockholders’ equity
|
312,822
|
|
|
446,945
|
|
||
Total liabilities and stockholders’ equity
|
$
|
721,971
|
|
|
$
|
922,640
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
(in thousands, except per share data)
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
Revenue
|
$
|
296,526
|
|
|
$
|
220,755
|
|
|
$
|
515,140
|
|
|
$
|
404,291
|
|
Cost of revenue
|
190,894
|
|
|
127,753
|
|
|
340,942
|
|
|
251,575
|
|
||||
Gross profit
|
105,632
|
|
|
93,002
|
|
|
174,198
|
|
|
152,716
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
55,497
|
|
|
93,049
|
|
|
121,663
|
|
|
170,028
|
|
||||
Sales and marketing
|
56,678
|
|
|
84,888
|
|
|
124,534
|
|
|
164,337
|
|
||||
General and administrative
|
18,440
|
|
|
24,442
|
|
|
41,199
|
|
|
49,163
|
|
||||
Total operating expenses
|
130,615
|
|
|
202,379
|
|
|
287,396
|
|
|
383,528
|
|
||||
Operating loss
|
(24,983
|
)
|
|
(109,377
|
)
|
|
(113,198
|
)
|
|
(230,812
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(3,784
|
)
|
|
(516
|
)
|
|
(4,598
|
)
|
|
(659
|
)
|
||||
Other income, net
|
222
|
|
|
1,176
|
|
|
383
|
|
|
1,012
|
|
||||
Total other income (expense), net
|
(3,562
|
)
|
|
660
|
|
|
(4,215
|
)
|
|
353
|
|
||||
Loss before income taxes
|
(28,545
|
)
|
|
(108,717
|
)
|
|
(117,413
|
)
|
|
(230,459
|
)
|
||||
Income tax expense (benefit)
|
1,991
|
|
|
(16,950
|
)
|
|
24,273
|
|
|
(31,233
|
)
|
||||
Net loss
|
$
|
(30,536
|
)
|
|
$
|
(91,767
|
)
|
|
$
|
(141,686
|
)
|
|
$
|
(199,226
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.22
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(1.02
|
)
|
|
$
|
(1.44
|
)
|
Diluted
|
$
|
(0.22
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(1.02
|
)
|
|
$
|
(1.44
|
)
|
|
|
|
|
|
|
|
|
||||||||
Shares used to compute net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
136,288
|
|
|
138,942
|
|
|
139,575
|
|
|
138,243
|
|
||||
Diluted
|
136,288
|
|
|
138,942
|
|
|
139,575
|
|
|
138,243
|
|
|
Six months ended
|
||||||
(in thousands)
|
June 30, 2017
|
|
June 30, 2016
|
||||
Operating activities:
|
|
|
|
||||
Net loss
|
$
|
(141,686
|
)
|
|
$
|
(199,226
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
23,160
|
|
|
17,804
|
|
||
Stock-based compensation
|
24,360
|
|
|
33,135
|
|
||
Excess tax benefit from stock-based compensation
(1)
|
—
|
|
|
(917
|
)
|
||
Deferred income taxes
|
(1,894
|
)
|
|
(13,494
|
)
|
||
Non-cash restructuring charges
|
2,800
|
|
|
—
|
|
||
Non-cash interest expense
|
1,530
|
|
|
—
|
|
||
Other
|
3,763
|
|
|
1,162
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
69,321
|
|
|
80,699
|
|
||
Inventory
|
40,484
|
|
|
98,343
|
|
||
Prepaid expenses and other assets
|
6,633
|
|
|
(9,282
|
)
|
||
Accounts payable and other liabilities
|
(178,536
|
)
|
|
(85,492
|
)
|
||
Deferred revenue
|
699
|
|
|
(1,457
|
)
|
||
Net cash used in operating activities
|
(149,366
|
)
|
|
(78,725
|
)
|
||
|
|
|
|
||||
Investing activities:
|
|
|
|
||||
Purchases of property and equipment, net
|
(10,112
|
)
|
|
(12,192
|
)
|
||
Maturities of marketable securities
|
14,160
|
|
|
71,302
|
|
||
Sale of marketable securities
|
11,623
|
|
|
6,791
|
|
||
Acquisitions, net of cash acquired
|
—
|
|
|
(104,353
|
)
|
||
Net cash provided by (used in) investing activities
|
15,671
|
|
|
(38,452
|
)
|
||
|
|
|
|
||||
Financing activities:
|
|
|
|
||||
Proceeds from issuance of common stock
|
6,629
|
|
|
5,265
|
|
||
Taxes paid related to net share settlement of equity awards
|
(8,210
|
)
|
|
(860
|
)
|
||
Proceeds from issuance of convertible senior notes
|
175,000
|
|
|
—
|
|
||
Prepayment of forward stock repurchase transaction
|
(78,000
|
)
|
|
—
|
|
||
Excess tax benefit from stock-based compensation
(1)
|
—
|
|
|
917
|
|
||
Payment of deferred acquisition-related consideration
|
(75
|
)
|
|
(950
|
)
|
||
Payment of debt issuance costs
|
(5,250
|
)
|
|
(3,221
|
)
|
||
Net cash provided by financing activities
|
90,094
|
|
|
1,151
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
1,242
|
|
|
(134
|
)
|
||
Net decrease in cash and cash equivalents
|
(42,359
|
)
|
|
(116,160
|
)
|
||
Cash and cash equivalents at beginning of period
|
192,114
|
|
|
279,672
|
|
||
Cash and cash equivalents at end of period
|
$
|
149,755
|
|
|
$
|
163,512
|
|
Standard
|
|
Description
|
|
Date of adoption
|
|
Effect on the financial statements or other significant matters
|
Standards that were adopted
|
|
|
|
|
||
Stock Compensation
Accounting Standards Update (ASU) No. 2016-09 (Topic 718) |
|
This standard simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. The new guidance also allows an entity to make a policy election to account for forfeitures as they occur.
|
|
January 1, 2017
|
|
Adoption of the standard resulted in the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The Company recorded an increase to U.S. deferred tax assets of $179 million which was recorded directly against accumulated deficit. The increased deferred tax asset allowed for an offset against long-term income tax payable of $16 million. A full valuation allowance was provided on the remaining U.S. deferred tax asset of $163 million, which was also recorded against accumulated deficit. The net impact to equity was a decrease in the accumulated deficit of approximately $16 million. The Company elected to apply the change in presentation to the statements of cash flows prospectively and elected to account for forfeitures as they occur.
|
Standards not yet adopted
|
|
|
|
|
||
Revenue from Contracts with Customers
ASU No. 2014-09, 2016-08, 2016-10 and 2016-12 (Topic 606)
|
|
The updated revenue standard establishes principles for recognizing revenue and develops a common revenue standard for all industries. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires that entities disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Early adoption is permitted, but not earlier than the first quarter of 2017. The retrospective or cumulative effect transition method is permitted.
|
|
January 1, 2018
|
|
The Company completed an initial analysis of the impact of the standard on its sales contract portfolio by reviewing its current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to its sales contracts. The Company's analysis of its contracts under the new standard supports the recognition of most of its revenue at the time product is shipped, consistent with its current revenue policy. Although the Company is continuing to review certain aspects of its policies and practices, it expects that, as a result of the adoption of the new guidance, the timing of recognizing certain sales incentives as a reduction of revenue will generally be earlier than under the existing guidance. (The Company recognized approximately $19 and $42 million as a reduction to revenue for such sales incentives for the first six months of 2017 and for the full year 2016, respectively.) The Company does not expect that the adoption of ASU 2014-09 will have a material impact to the quarterly or yearly sales incentives recognized. The Company expects to utilize the modified retrospective transition method.
|
Leases
ASU No. 2016-02(Topic 842)
|
|
This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. The new standard should be applied on a modified retrospective basis.
|
|
January 1, 2019
|
|
Although the Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption.
|
Income Taxes
ASU No. 2016-16 (Topic 740)
|
|
This standard requires entities to recognize the income tax consequences of intra-entity asset transfers when they occur. This removes the exception to postpone recognition until the asset has been sold to an outside party. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted during the first interim period of a fiscal year.
|
|
January 1, 2018
|
|
The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.
|
Intangible - Goodwill and Other
ASU No. 2017-04 (Topic 350)
|
|
This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment will be determined based on the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and requires a prospective transition method.
|
|
January 1, 2020
|
|
The Company does not expect the adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.
|
Stock Compensation
ASU No. 2017-09 (Topic 718) |
|
This standard clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this standard, modification is required only if the fair value, the vesting conditions, or the classification of an award as equity or liability changes as a result of the change in terms or conditions. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted.
|
|
January 1, 2018
|
|
The Company is evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.
|
(in thousands)
|
June 30,
2017 |
|
December 31, 2016
|
||||
Cash
|
$
|
57.518
|
|
|
$
|
174,090
|
|
Cash equivalents
|
92.237
|
|
|
18,024
|
|
||
Total cash and cash equivalents
|
$
|
149,755
|
|
|
$
|
192,114
|
|
Marketable securities
|
$
|
—
|
|
|
$
|
25,839
|
|
(in thousands)
|
June 30,
2017 |
|
December 31, 2016
|
||||
Components
|
$
|
18,828
|
|
|
$
|
25,236
|
|
Finished goods
|
107,880
|
|
|
141,956
|
|
||
Total inventory
|
$
|
126,708
|
|
|
$
|
167,192
|
|
(in thousands)
|
June 30,
2017 |
|
December 31, 2016
|
||||
Leasehold improvements
|
$
|
49,520
|
|
|
$
|
48,103
|
|
Production, engineering and other equipment
|
47,280
|
|
|
46,328
|
|
||
Tooling
|
25,506
|
|
|
23,742
|
|
||
Computers and software
|
19,834
|
|
|
18,750
|
|
||
Furniture and office equipment
|
12,909
|
|
|
12,530
|
|
||
Tradeshow equipment and other
|
7,578
|
|
|
7,578
|
|
||
Construction in progress
|
11,859
|
|
|
1,870
|
|
||
Gross property and equipment
|
174,486
|
|
|
158,901
|
|
||
Less: Accumulated depreciation and amortization
|
(102,653
|
)
|
|
(82,392
|
)
|
||
Property and equipment, net
|
$
|
71,833
|
|
|
$
|
76,509
|
|
|
June 30, 2017
|
||||||||||
(in thousands)
|
Gross carrying value
|
|
Accumulated
amortization
|
|
Net carrying value
|
||||||
Purchased technology
|
$
|
47,001
|
|
|
$
|
(21,515
|
)
|
|
$
|
25,486
|
|
In-process research and development (IPR&D)
|
3,515
|
|
|
—
|
|
|
3,515
|
|
|||
Total intangible assets
|
$
|
50,516
|
|
|
$
|
(21,515
|
)
|
|
$
|
29,001
|
|
|
December 31, 2016
|
||||||||||
(in thousands)
|
Gross carrying value
|
|
Accumulated
amortization |
|
Net carrying value
|
||||||
Purchased technology
|
$
|
47,001
|
|
|
$
|
(17,086
|
)
|
|
$
|
29,915
|
|
IPR&D
|
3,615
|
|
|
—
|
|
|
3,615
|
|
|||
Total intangible assets
|
$
|
50,616
|
|
|
$
|
(17,086
|
)
|
|
$
|
33,530
|
|
(in thousands)
|
Total
|
||
Year ending December 31,
|
|
||
2017 (remaining 6 months)
|
$
|
4,260
|
|
2018
|
8,297
|
|
|
2019
|
7,786
|
|
|
2020
|
4,273
|
|
|
2021
|
870
|
|
|
|
$
|
25,486
|
|
(in thousands)
|
June 30,
2017 |
|
December 31, 2016
|
||||
Accrued payables
|
$
|
49,483
|
|
|
$
|
91,655
|
|
Employee related liabilities
(1)
|
20,546
|
|
|
42,577
|
|
||
Accrued sales incentives
|
26,033
|
|
|
40,070
|
|
||
Warranty liability
|
9,613
|
|
|
11,456
|
|
||
Customer deposits
|
5,433
|
|
|
4,381
|
|
||
Income taxes payable
|
19,375
|
|
|
2,756
|
|
||
Purchase order commitments
|
4,456
|
|
|
4,730
|
|
||
Other
|
16,378
|
|
|
13,698
|
|
||
Accrued liabilities
|
$
|
151,317
|
|
|
$
|
211,323
|
|
(1)
|
See Note 10 for amounts associated with restructuring liabilities.
|
•
|
during any calendar quarter beginning after the calendar quarter ending on September 30, 2017, if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days of the immediately preceding fiscal quarter is greater than or equal to
130%
of the conversion price of the Notes on each applicable trading day;
|
•
|
during the five-business day period following any five consecutive trading day period in which the trading price for the Notes is less than
98%
of the product of the last reported sale price of Class A common stock and the conversion rate for the Notes on each such trading day; or
|
•
|
upon the occurrence of specified corporate events.
|
|
Options outstanding
|
|||||||||
|
Shares (in thousands)
|
|
Weighted- average
exercise price |
|
Aggregate
intrinsic value (in thousands) |
|||||
Outstanding at December 31, 2016:
|
12,379
|
|
|
$
|
12.17
|
|
|
$
|
32,772
|
|
Granted
|
1,747
|
|
|
9.30
|
|
|
|
|||
Exercised
|
(1,113
|
)
|
|
1.45
|
|
|
|
|||
Forfeited/Cancelled
|
(2,318
|
)
|
|
17.44
|
|
|
|
|||
Outstanding at June 30, 2017:
|
10,695
|
|
|
11.68
|
|
|
22,769
|
|
||
|
|
|
|
|
|
|||||
Exercisable at June 30, 2017
|
8,162
|
|
|
$
|
11.46
|
|
|
$
|
22,769
|
|
|
Shares (in thousands)
|
|
Weighted- average grant date fair value
|
|||
Non-vested shares at December 31, 2016:
|
7,970
|
|
|
$
|
18.08
|
|
Granted
|
4,036
|
|
|
9.27
|
|
|
Vested
|
(2,537
|
)
|
|
13.99
|
|
|
Forfeited
|
(2,388
|
)
|
|
17.79
|
|
|
Non-vested shares at June 30, 2017:
|
7,081
|
|
|
14.62
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
(in thousands)
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
Cost of revenue
|
$
|
415
|
|
|
$
|
412
|
|
|
$
|
910
|
|
|
$
|
769
|
|
Research and development
|
5,390
|
|
|
7,086
|
|
|
11,072
|
|
|
13,096
|
|
||||
Sales and marketing
|
1,995
|
|
|
3,679
|
|
|
4,686
|
|
|
6,883
|
|
||||
General and administrative
|
3,435
|
|
|
6,227
|
|
|
7,692
|
|
|
12,387
|
|
||||
Total stock-based compensation expense
|
$
|
11,235
|
|
|
$
|
17,404
|
|
|
$
|
24,360
|
|
|
$
|
33,135
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
(in thousands, except per share data)
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
|
|
|
|
|
|
|
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(30,536
|
)
|
|
$
|
(91,767
|
)
|
|
$
|
(141,686
|
)
|
|
$
|
(199,226
|
)
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares—basic for Class A and Class B common stock
|
136,288
|
|
|
138,942
|
|
|
139,575
|
|
|
138,243
|
|
||||
Effect of dilutive stock-based awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted-average common shares—diluted for Class A and Class B common stock
|
136,288
|
|
|
138,942
|
|
|
139,575
|
|
|
138,243
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.22
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(1.02
|
)
|
|
$
|
(1.44
|
)
|
Diluted
|
$
|
(0.22
|
)
|
|
$
|
(0.66
|
)
|
|
$
|
(1.02
|
)
|
|
$
|
(1.44
|
)
|
|
Three months ended
|
|
Six months ended
|
||||||||
(in thousands)
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||
Effect of anti-dilutive stock-based awards
|
19,474
|
|
|
21,391
|
|
|
20,235
|
|
|
19,848
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
(dollars in thousands)
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
Income tax expense (benefit)
|
$
|
1,991
|
|
|
$
|
(16,950
|
)
|
|
$
|
24,273
|
|
|
$
|
(31,233
|
)
|
Effective tax rate
|
(7.0
|
)%
|
|
15.6
|
%
|
|
(20.7
|
)%
|
|
13.6
|
%
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
(in thousands)
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
Beginning balances
|
$
|
11,442
|
|
|
$
|
8,011
|
|
|
$
|
11,944
|
|
|
$
|
10,855
|
|
Charged to cost of revenue
|
829
|
|
|
5,871
|
|
|
2,258
|
|
|
8,541
|
|
||||
Settlements of warranty claims
|
(2,297
|
)
|
|
(4,943
|
)
|
|
(4,228
|
)
|
|
(10,457
|
)
|
||||
Ending balances
|
$
|
9,974
|
|
|
$
|
8,939
|
|
|
$
|
9,974
|
|
|
$
|
8,939
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
(in thousands)
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
Accounts receivable sold
|
$
|
41,574
|
|
|
$
|
43,794
|
|
|
$
|
78,962
|
|
|
$
|
64,304
|
|
Factoring fees
|
368
|
|
|
317
|
|
|
680
|
|
|
459
|
|
|
Three months ended
|
|
Six months ended
|
||||
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
Customer A
|
17%
|
|
21%
|
|
16%
|
|
18%
|
Customer B
|
12%
|
|
14%
|
|
*
|
|
14%
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
(in thousands)
|
June 30,
2017 |
|
June 30,
2016 |
|
June 30,
2017 |
|
June 30,
2016 |
||||||||
Americas
|
$
|
157,027
|
|
|
$
|
124,570
|
|
|
$
|
252,734
|
|
|
$
|
209,875
|
|
Europe, Middle East and Africa ("EMEA")
|
80,214
|
|
|
60,714
|
|
|
148,077
|
|
|
120,992
|
|
||||
Asia and Pacific ("APAC")
|
59,285
|
|
|
35,471
|
|
|
114,329
|
|
|
73,424
|
|
||||
Total revenue
|
$
|
296,526
|
|
|
$
|
220,755
|
|
|
$
|
515,140
|
|
|
$
|
404,291
|
|
|
Six months ended
|
||||||
(in thousands)
|
June 30,
2017 |
|
June 30,
2016 |
||||
Cost of revenue
|
$
|
418
|
|
|
$
|
364
|
|
Research and development
|
7,381
|
|
|
2,655
|
|
||
Sales and marketing
|
5,603
|
|
|
2,678
|
|
||
General and administrative
|
1,409
|
|
|
811
|
|
||
Total restructuring charges
|
$
|
14,811
|
|
|
$
|
6,508
|
|
(in thousands)
|
Severance
|
|
Other
|
|
Total
|
||||||
Restructuring liability as of December 31, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restructuring charges
|
8,884
|
|
|
92
|
|
|
8,976
|
|
|||
Cash paid
|
(7,763
|
)
|
|
(5
|
)
|
|
(7,768
|
)
|
|||
Non-cash settlements
|
—
|
|
|
—
|
|
|
—
|
|
|||
Restructuring liability as of June 30, 2017
|
$
|
1,121
|
|
|
$
|
87
|
|
|
$
|
1,208
|
|
(in thousands)
|
Severance
|
|
Other
|
|
Total
|
||||||
Restructuring liability as of December 31, 2016
|
$
|
9,660
|
|
|
$
|
879
|
|
|
$
|
10,539
|
|
Restructuring charges
|
2,009
|
|
|
1,025
|
|
|
3,034
|
|
|||
Cash paid
|
(11,177
|
)
|
|
(1,818
|
)
|
|
(12,995
|
)
|
|||
Non-cash settlements
|
17
|
|
|
20
|
|
|
37
|
|
|||
Restructuring liability as of June 30, 2017
|
$
|
509
|
|
|
$
|
106
|
|
|
$
|
615
|
|
•
|
Overview.
Discussion of our business and overall analysis of financial and other highlights affecting the Company in order to provide context for the remainder of MD&A.
|
•
|
Results of Operations.
Analysis of our financial results comparing the
second
quarter and first
six
months of 2017 to 2016.
|
•
|
Liquidity and Capital Resources.
Analysis of changes in our balance sheets and cash flows, and discussion of our financial condition and potential sources of liquidity.
|
•
|
Contractual Commitments.
Material changes, outside our ordinary course of business, to our contractual obligations, off-balance sheet arrangements and indemnifications from
December 31, 2016
.
|
•
|
Non-GAAP Financial Measures.
A presentation of results reconciling GAAP to non-GAAP adjusted measures.
|
|
|
|
% Change
|
||||||||||||||
(units and dollars in thousands, except per share amounts)
|
Q2 2017
|
|
Q1 2017
|
|
Q2 2016
|
|
Q2 2017 vs. Q1 2017
|
|
Q2 2017 vs. Q2 2016
|
||||||||
Revenue
|
$
|
296,526
|
|
|
$
|
218,614
|
|
|
$
|
220,755
|
|
|
36
|
%
|
|
34
|
%
|
Camera units shipped
(1)
|
1,061
|
|
|
738
|
|
|
759
|
|
|
44
|
%
|
|
40
|
%
|
|||
Gross margin
(2)
|
35.6
|
%
|
|
31.4
|
%
|
|
42.1
|
%
|
|
(420) bps
|
|
|
(650) bps
|
|
|||
Operating expenses
|
$
|
130,615
|
|
|
$
|
156,781
|
|
|
$
|
202,379
|
|
|
(17
|
)%
|
|
(35
|
)%
|
Net loss
|
$
|
(30,536
|
)
|
|
$
|
(111,150
|
)
|
|
$
|
(91,767
|
)
|
|
(73
|
)%
|
|
(67
|
)%
|
Diluted net loss per share
|
$
|
(0.22
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(0.66
|
)
|
|
(72
|
)%
|
|
(67
|
)%
|
Cash used in operations
|
$
|
(11,428
|
)
|
|
$
|
(137,938
|
)
|
|
$
|
(45,460
|
)
|
|
(92
|
)%
|
|
(75
|
)%
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other financial information:
|
|
|
|
|
|
|
|
|
|
||||||||
Adjusted EBITDA
(3)
|
$
|
5,120
|
|
|
$
|
(45,669
|
)
|
|
$
|
(76,757
|
)
|
|
(111
|
)%
|
|
(107
|
)%
|
Non-GAAP net loss
(4)
|
$
|
(12,914
|
)
|
|
$
|
(62,783
|
)
|
|
$
|
(72,595
|
)
|
|
(79
|
)%
|
|
(82
|
)%
|
Non-GAAP loss per share
|
$
|
(0.09
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.52
|
)
|
|
(80
|
)%
|
|
(83
|
)%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||
(dollars in thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||||||
Revenue
|
$
|
296,526
|
|
|
100
|
%
|
|
$
|
220,755
|
|
|
100
|
%
|
|
$
|
515,140
|
|
|
100
|
%
|
|
$
|
404,291
|
|
|
100
|
%
|
Cost of revenue
|
190,894
|
|
|
64
|
|
|
127,753
|
|
|
58
|
|
|
340,942
|
|
|
66
|
|
|
251,575
|
|
|
62
|
|
||||
Gross profit
|
105,632
|
|
|
36
|
|
|
93,002
|
|
|
42
|
|
|
174,198
|
|
|
34
|
|
|
152,716
|
|
|
38
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Research and development
|
55,497
|
|
|
19
|
|
|
93,049
|
|
|
42
|
|
|
121,663
|
|
|
24
|
|
|
170,028
|
|
|
42
|
|
||||
Sales and marketing
|
56,678
|
|
|
19
|
|
|
84,888
|
|
|
38
|
|
|
124,534
|
|
|
24
|
|
|
164,337
|
|
|
41
|
|
||||
General and administrative
|
18,440
|
|
|
6
|
|
|
24,442
|
|
|
12
|
|
|
41,199
|
|
|
8
|
|
|
49,163
|
|
|
12
|
|
||||
Total operating expenses
|
130,615
|
|
|
44
|
|
|
202,379
|
|
|
92
|
|
|
287,396
|
|
|
56
|
|
|
383,528
|
|
|
95
|
|
||||
Operating loss
|
(24,983
|
)
|
|
(8
|
)
|
|
(109,377
|
)
|
|
(50
|
)
|
|
(113,198
|
)
|
|
(22
|
)
|
|
(230,812
|
)
|
|
(57
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
(3,784
|
)
|
|
(1
|
)
|
|
(516
|
)
|
|
—
|
|
|
(4,598
|
)
|
|
(1
|
)
|
|
(659
|
)
|
|
—
|
|
||||
Other income, net
|
222
|
|
|
—
|
|
|
1,176
|
|
|
1
|
|
|
383
|
|
|
—
|
|
|
1,012
|
|
|
—
|
|
||||
Total other income (expense), net
|
(3,562
|
)
|
|
(1
|
)
|
|
660
|
|
|
1
|
|
|
(4,215
|
)
|
|
(1
|
)
|
|
353
|
|
|
—
|
|
||||
Loss before income taxes
|
(28,545
|
)
|
|
(9
|
)
|
|
(108,717
|
)
|
|
(49
|
)
|
|
(117,413
|
)
|
|
(23
|
)
|
|
(230,459
|
)
|
|
(57
|
)
|
||||
Income tax expense (benefit)
|
1,991
|
|
|
1
|
|
|
(16,950
|
)
|
|
(8
|
)
|
|
24,273
|
|
|
5
|
|
|
(31,233
|
)
|
|
(8
|
)
|
||||
Net loss
|
$
|
(30,536
|
)
|
|
(10
|
)%
|
|
$
|
(91,767
|
)
|
|
(41
|
)%
|
|
$
|
(141,686
|
)
|
|
(28
|
)%
|
|
$
|
(199,226
|
)
|
|
(49
|
)%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
(in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Camera units shipped
|
1,061
|
|
|
759
|
|
|
40
|
%
|
|
1,799
|
|
|
1,460
|
|
|
23
|
%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Direct channel
|
$
|
169,672
|
|
|
$
|
127,942
|
|
|
33
|
%
|
|
$
|
284,437
|
|
|
$
|
211,831
|
|
|
34
|
%
|
Percentage of revenue
|
57
|
%
|
|
58
|
%
|
|
|
|
55
|
%
|
|
52
|
%
|
|
|
||||||
Distribution channel
|
$
|
126,854
|
|
|
$
|
92,813
|
|
|
37
|
%
|
|
$
|
230,703
|
|
|
$
|
192,460
|
|
|
20
|
%
|
Percentage of revenue
|
43
|
%
|
|
42
|
%
|
|
|
|
45
|
%
|
|
48
|
%
|
|
|
||||||
Total revenue
|
$
|
296,526
|
|
|
$
|
220,755
|
|
|
34
|
%
|
|
$
|
515,140
|
|
|
$
|
404,291
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Americas
|
$
|
157,027
|
|
|
$
|
124,570
|
|
|
26
|
%
|
|
$
|
252,734
|
|
|
$
|
209,875
|
|
|
20
|
%
|
Percentage of revenue
|
53
|
%
|
|
56
|
%
|
|
|
|
49
|
%
|
|
52
|
%
|
|
|
||||||
EMEA
|
$
|
80,214
|
|
|
$
|
60,714
|
|
|
32
|
%
|
|
$
|
148,077
|
|
|
$
|
120,992
|
|
|
22
|
%
|
Percentage of revenue
|
27
|
%
|
|
28
|
%
|
|
|
|
29
|
%
|
|
30
|
%
|
|
|
||||||
APAC
|
$
|
59,285
|
|
|
$
|
35,471
|
|
|
67
|
%
|
|
$
|
114,329
|
|
|
$
|
73,424
|
|
|
56
|
%
|
Percentage of revenue
|
20
|
%
|
|
16
|
%
|
|
|
|
22
|
%
|
|
18
|
%
|
|
|
||||||
Total revenue
|
$
|
296,526
|
|
|
$
|
220,755
|
|
|
34
|
%
|
|
$
|
515,140
|
|
|
$
|
404,291
|
|
|
27
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
(dollars in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Cost of revenue
|
$
|
189,259
|
|
|
$
|
127,119
|
|
|
49
|
%
|
|
$
|
337,184
|
|
|
$
|
249,998
|
|
|
35
|
%
|
Stock-based compensation
|
415
|
|
|
412
|
|
|
1
|
%
|
|
910
|
|
|
769
|
|
|
18
|
%
|
||||
Acquisition-related costs
|
1,195
|
|
|
222
|
|
|
438
|
%
|
|
2,430
|
|
|
444
|
|
|
447
|
%
|
||||
Restructuring costs
|
25
|
|
|
—
|
|
|
N/A
|
|
|
418
|
|
|
364
|
|
|
15
|
%
|
||||
Total cost of revenue
|
$
|
190,894
|
|
|
$
|
127,753
|
|
|
49
|
%
|
|
$
|
340,942
|
|
|
$
|
251,575
|
|
|
36
|
%
|
Gross margin
|
35.6
|
%
|
|
42.1
|
%
|
|
|
|
33.8
|
%
|
|
37.8
|
%
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
(dollars in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Research and development
|
$
|
47,459
|
|
|
$
|
83,745
|
|
|
(43
|
)%
|
|
$
|
101,128
|
|
|
$
|
150,774
|
|
|
(33
|
)%
|
Stock-based compensation
|
5,390
|
|
|
7,086
|
|
|
(24
|
)%
|
|
11,072
|
|
|
13,096
|
|
|
(15
|
)%
|
||||
Acquisition-related costs
|
946
|
|
|
2,218
|
|
|
(57
|
)%
|
|
2,082
|
|
|
3,503
|
|
|
(41
|
)%
|
||||
Restructuring costs
|
1,702
|
|
|
—
|
|
|
N/A
|
|
|
7,381
|
|
|
2,655
|
|
|
178
|
%
|
||||
Total research and development
|
$
|
55,497
|
|
|
$
|
93,049
|
|
|
(40
|
)%
|
|
$
|
121,663
|
|
|
$
|
170,028
|
|
|
(28
|
)%
|
Percentage of revenue
|
18.7
|
%
|
|
42.2
|
%
|
|
|
|
23.6
|
%
|
|
42.1
|
%
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
(dollars in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Sales and marketing
|
$
|
54,322
|
|
|
$
|
81,209
|
|
|
(33
|
)%
|
|
$
|
114,245
|
|
|
$
|
154,754
|
|
|
(26
|
)%
|
Stock-based compensation
|
1,995
|
|
|
3,679
|
|
|
(46
|
)%
|
|
4,686
|
|
|
6,883
|
|
|
(32
|
)%
|
||||
Acquisition-related costs
|
—
|
|
|
—
|
|
|
N/A
|
|
|
—
|
|
|
22
|
|
|
(100
|
)%
|
||||
Restructuring costs
|
361
|
|
|
—
|
|
|
N/A
|
|
|
5,603
|
|
|
2,678
|
|
|
109
|
%
|
||||
Total sales and marketing
|
$
|
56,678
|
|
|
$
|
84,888
|
|
|
(33
|
)%
|
|
$
|
124,534
|
|
|
$
|
164,337
|
|
|
(24
|
)%
|
Percentage of revenue
|
19.1
|
%
|
|
38.5
|
%
|
|
|
|
24.2
|
%
|
|
40.6
|
%
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
(dollars in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
General and administrative
|
$
|
14,736
|
|
|
$
|
17,980
|
|
|
(18
|
)%
|
|
$
|
32,120
|
|
|
$
|
34,861
|
|
|
(8
|
)%
|
Stock-based compensation
|
3,435
|
|
|
6,227
|
|
|
(45
|
)%
|
|
7,692
|
|
|
12,387
|
|
|
(38
|
)%
|
||||
Acquisition-related costs
|
1
|
|
|
235
|
|
|
(100
|
)%
|
|
(22
|
)
|
|
1,104
|
|
|
(102
|
)%
|
||||
Restructuring costs
|
268
|
|
|
—
|
|
|
N/A
|
|
|
1,409
|
|
|
811
|
|
|
74
|
%
|
||||
Total general and administrative expenses
|
$
|
18,440
|
|
|
$
|
24,442
|
|
|
(25
|
)%
|
|
$
|
41,199
|
|
|
$
|
49,163
|
|
|
(16
|
)%
|
Percentage of revenue
|
6.2
|
%
|
|
11.1
|
%
|
|
|
|
8.0
|
%
|
|
12.2
|
%
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
(dollars in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Interest expense
|
$
|
(3,784
|
)
|
|
$
|
(516
|
)
|
|
633
|
%
|
|
$
|
(4,598
|
)
|
|
$
|
(659
|
)
|
|
598
|
%
|
Other income, net
|
222
|
|
|
1,176
|
|
|
(81
|
)%
|
|
383
|
|
|
1,012
|
|
|
(62
|
)%
|
||||
Total other income (expense), net
|
$
|
(3,562
|
)
|
|
$
|
660
|
|
|
(640
|
)%
|
|
$
|
(4,215
|
)
|
|
$
|
353
|
|
|
(1,294
|
)%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||
(dollars in thousands)
|
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
||||||||||
Income tax expense (benefit)
|
$
|
1,991
|
|
|
$
|
(16,950
|
)
|
|
(112
|
)%
|
|
$
|
24,273
|
|
|
$
|
(31,233
|
)
|
|
(178
|
)%
|
Effective tax rate
|
(7.0
|
)%
|
|
15.6
|
%
|
|
|
|
(20.7
|
)%
|
|
13.6
|
%
|
|
|
(dollars in thousands)
|
June 30,
2017 |
|
December 31,
2016 |
||||
Cash and cash equivalents
|
$
|
149,755
|
|
|
$
|
192,114
|
|
Marketable securities
|
—
|
|
|
25,839
|
|
||
Total cash and investments
|
$
|
149,755
|
|
|
$
|
217,953
|
|
Percentage of total assets
|
21
|
%
|
|
24
|
%
|
•
|
We expect that operating expenses and inventory purchases will constitute a material use of our cash balances. We intend to continue to manage our operating activities in line with our existing cash and available financial resources. We believe the restructuring actions and other cost saving initiatives we have taken will enable us to significantly reduce our operating expenses in 2017 compared to 2016.
|
•
|
We expect to spend significantly less on capital expenditures in 2017 than in 2016. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the timing of new product introductions, market acceptance of our products, and overall economic conditions.
|
•
|
In March 2016, we entered into a credit agreement with a syndicate of banks that provides for a secured revolving credit facility under which we could borrow up to an aggregate of
$250 million
. As of
June 30, 2017
, we could borrow up to approximately
$89 million
under the credit facility, based upon a borrowing base formula with respect to our inventory and accounts receivable balances. Our credit facility terminates in March 2021. (See Note 3 to the Notes to Condensed Consolidated Financial Statements above for additional information.)
|
•
|
We have completed acquisitions in the past and we may evaluate additional possible acquisitions of, or strategic investments in, businesses, products and technologies that are complementary to our business, which may require the use of cash.
|
•
|
We used a portion of the net proceeds from the Notes offering to pay for the Prepaid Forward and intend to use the remaining proceeds from the offering for general corporate purposes.
|
|
Six months ended
|
|||||||||
(in thousands)
|
June 30,
2017 |
|
June 30,
2016 |
|
% Change
|
|||||
Net cash provided by (used in):
|
|
|
|
|
|
|||||
Operating activities
|
$
|
(149,366
|
)
|
|
$
|
(78,725
|
)
|
|
90
|
%
|
Investing activities
|
$
|
15,671
|
|
|
$
|
(38,452
|
)
|
|
(141
|
)%
|
Financing activities
|
$
|
90,094
|
|
|
$
|
1,151
|
|
|
7,727
|
%
|
|
Three months ended
|
||||||||||
(in thousands)
|
June 30, 2017
|
|
March 31, 2017
|
|
June 30, 2016
|
||||||
Net loss
|
$
|
(30,536
|
)
|
|
$
|
(111,150
|
)
|
|
$
|
(91,767
|
)
|
Income tax expense (benefit)
|
1,991
|
|
|
22,282
|
|
|
(16,950
|
)
|
|||
Interest income (expense), net
|
3,652
|
|
|
761
|
|
|
117
|
|
|||
Depreciation and amortization
|
11,467
|
|
|
11,693
|
|
|
9,482
|
|
|||
POP display amortization
|
4,955
|
|
|
5,165
|
|
|
4,957
|
|
|||
Stock-based compensation
|
11,235
|
|
|
13,125
|
|
|
17,404
|
|
|||
Restructuring costs
|
2,356
|
|
|
12,455
|
|
|
—
|
|
|||
Adjusted EBITDA
|
$
|
5,120
|
|
|
$
|
(45,669
|
)
|
|
$
|
(76,757
|
)
|
|
Three months ended
|
||||||||||
(in thousands)
|
June 30, 2017
|
|
March 31, 2017
|
|
June 30, 2016
|
||||||
Net loss
|
$
|
(30,536
|
)
|
|
$
|
(111,150
|
)
|
|
$
|
(91,767
|
)
|
Stock-based compensation
|
11,235
|
|
|
13,125
|
|
|
17,404
|
|
|||
Acquisition-related costs
|
2,142
|
|
|
2,348
|
|
|
2,675
|
|
|||
Restructuring costs
|
2,356
|
|
|
12,455
|
|
|
—
|
|
|||
Non-cash interest expense
|
1,530
|
|
|
—
|
|
|
—
|
|
|||
Income tax adjustments
(1)
|
359
|
|
|
20,439
|
|
|
(907
|
)
|
|||
Non-GAAP net loss
|
$
|
(12,914
|
)
|
|
$
|
(62,783
|
)
|
|
$
|
(72,595
|
)
|
Non-GAAP diluted loss per share
|
$
|
(0.09
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(0.52
|
)
|
•
|
these non-GAAP financial measures may exclude certain recurring, non-cash charges such as stock-based compensation, non-cash interest expense and amortization of acquired intangible assets;
|
•
|
adjusted EBITDA does not reflect tax payments that reduce cash available to us
;
|
•
|
adjusted EBITDA excludes depreciation and amortization and, although these are non-cash charges, the property and equipment being depreciated and amortized often will have to be replaced in the future, and adjusted EBITDA does not reflect any cash capital expenditure requirements for such replacements;
|
•
|
adjusted EBITDA excludes the amortization of POP display assets because it is a non-cash charge, and similar to depreciation of property and equipment and amortization of acquired intangible assets;
|
•
|
adjusted EBITDA and non-GAAP net income (loss) excludes the impairment of intangible assets because it is a non-cash charge that is inconsistent in amount and frequency;
|
•
|
adjusted EBITDA and non-GAAP net income (loss) excludes restructuring costs because these expenses do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of current operating performance or comparisons to the operating performance in other periods;
|
•
|
non-GAAP net income (loss) also excludes non-cash interest expense because it is a non-cash charge, provides greater visibility to the underlying performance of the business operations, facilitates comparison of our results with other periods and may also facilitate comparison with the results of other companies in our industry; and
|
•
|
other companies may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.
|
•
|
difficulties in staffing and managing foreign operations;
|
•
|
burdens of complying with a wide variety of laws and regulations, including environmental, packaging and labeling, and drone regulations;
|
•
|
adverse tax effects and foreign exchange controls making it difficult to repatriate earnings and cash;
|
•
|
the impact of foreign currency exchange rates and interest rates;
|
•
|
political and economic instability;
|
•
|
terrorist activities and natural disasters;
|
•
|
trade restrictions;
|
•
|
differing employment practices and laws and labor disruptions;
|
•
|
the imposition of government controls;
|
•
|
lesser degrees of intellectual property protection;
|
•
|
tariffs and customs duties and the classifications of our goods by applicable governmental bodies;
|
•
|
a legal system subject to undue influence or corruption; and
|
•
|
a business culture in which illegal sales practices may be prevalent.
|
•
|
our board of directors is not currently classified, but at such time as all shares of our Class B common stock have been converted into shares of our Class A common stock, our board of directors will be classified into three classes of directors with staggered three-year terms;
|
•
|
so long as any shares of our Class B common stock are outstanding, special meetings of our stockholders may be called by the holders of 10% of the outstanding voting power of all then outstanding shares of stock, a majority of our board of directors, the chairman of our board of directors, our chief executive officer or our president,
|
•
|
when no shares of our Class B common stock are outstanding, only the chairman of our board of directors, our chief executive officer, our president or a majority of our board of directors will be authorized to call a special meeting of stockholders;
|
•
|
our stockholders may only take action at a meeting of stockholders and not by written consent;
|
•
|
vacancies on our board of directors may be filled only by our board of directors and not by stockholders;
|
•
|
directors may be removed from office with or without cause so long as our board of directors is not classified, and thereafter directors may be removed from office only for cause;
|
•
|
our restated certificate of incorporation provides for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets;
|
•
|
our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, by our board of directors without stockholder approval and which may contain voting, liquidation, dividend and other rights superior to those of our Class A and Class B common stock; and
|
•
|
advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
|
•
|
heighten our vulnerability to adverse general economic conditions and competitive pressures will be heightened;
|
•
|
require us to dedicate a larger portion of our cash flow from operations to interest payments, limiting the availability of cash for other purposes;
|
•
|
limit our flexibility in planning for, or reacting to, changes in our business and industry; and
|
•
|
impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.
|
Period
|
|
Total Number of Shares Repurchased
(1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans
(1)
|
||||||
April 1 - 30, 2017
|
|
9,166
|
|
|
$
|
8.51
|
|
|
9,166
|
|
|
$
|
—
|
|
May 1 - 31, 2017
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|||
June 1 - 30, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Total
|
|
9,166
|
|
|
$
|
8.51
|
|
|
9,166
|
|
|
$
|
—
|
|
|
|
GoPro, Inc.
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated:
|
August 3, 2017
|
By: /s/ Nicholas Woodman
|
|
|
Nicholas Woodman
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated:
|
August 3, 2017
|
By: /s/ Brian McGee
|
|
|
Brian McGee
Chief Financial Officer (Principal Financial Officer) |
Exhibit
|
|
|
Incorporated by Reference
|
Filed
|
|||
Number
|
|
Exhibit Title
|
Form
|
File No.
|
Exhibit
|
Filing Date
|
Herewith
|
4.01
|
|
Indenture, dated as of April 12, 2017, between the Company and Wells Fargo Bank, National Association (including the form of 3.50% Convertible Senior Notes due 2022)
|
8-K
|
001-36514
|
4.1
|
April 12, 2017
|
|
10.01
|
|
Forward Stock Purchase Transaction, dated April 6, 2017, between the Company and JPMorgan Chase Bank, National Association
|
8-K
|
001-36514
|
10.1
|
April 7, 2017
|
|
10.02
|
|
First Amendment, dated August 12, 2016, to Office Lease Agreement dated November 1, 2011, between the Company and RAR2-Clearview Business Park Owner, LLC
|
|
|
|
|
X
|
31.01
|
|
Certification of Principal Executive Officer Required Under Rule 13(a)-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
X
|
31.02
|
|
Certification of Principal Financial Officer Required Under Rule 13(a)-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
|
|
|
X
|
32.01‡
|
|
Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
|
|
|
|
|
X
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
|
A.
|
Landlord (as successor in interest to Locon San Mateo, LLC, a Delaware limited liability company) and Tenant (formerly known as Woodman Labs, Inc., a Delaware corporation, successor in interest to Woodman Labs, Inc., a California corporation) are parties to that certain Lease Agreement dated September 10, 2013 (the
“Lease”
). Pursuant to the Lease, Landlord has leased to Tenant space currently containing approximately 2,067 rentable square feet (the
“Premises”
) described as the larger of the two outbuildings located north of 3000E Clearview Way, San Mateo, California (the
“Building”
).
|
B.
|
In addition, Landlord and Tenant are parties to that certain Office Lease Agreement dated November 1, 2011, as amended.
|
C.
|
In addition, Tenant is a party to that certain Sublease dated June__ [sic], 2013. between Akamai Technologies. Inc., a Delaware corporation, and Tenant.
|
D.
|
The Lease by its terms shall expire on February 15, 2019 (
“Prior Termination Date”
), and the parties desire to extend the Term of the Lease, all on the following terms and conditions.
|
1.
|
Extension.
The Term of the Lease is hereby extended for a period of sixty (60) months commencing on February 16, 2019 and expiring on February 15, 2024 (“
Extended Termination Date
”), unless sooner terminated in accordance with the terms of the Lease. That portion of the Term commencing the day immediately following the Prior Termination Date (“
Extension Date
”) and ending on the Extended Termination Date shall be referred to herein as the “
Extended Term
”.
|
2.
|
Monthly Base Rent.
For the period beginning February 16, 2019 (the “
Adjustment Date
”) and continuing through the Extended Termination Date, the Monthly Base Rent shall be adjusted to reflect any increase in the CPI (defined below) (the “
Base Rent Adjustment
”). Such Base Rent Adjustment shall be accomplished by multiplying the Base Rent for the immediately preceding twelve (12) month period prior to the Adjustment Date (which shall not be diminished by any credits or abatements granted in the Lease, as amended hereby) by a fraction, the numerator of which shall be the most recently published CPI index number prior to Adjustment Date and the denominator of which shall be the most recently published CPI Index number prior the reporting period immediately preceding the Extension Date, provided that notwithstanding anything to the contrary set forth herein, in no event shall the Monthly Base Rent so calculated be less than 103% of the Monthly Base Rent in effect during the immediately proceeding twelve (12) month period prior to the Adjustment Date. For purposes hereof, “
CPI
” shall mean the Revised Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, for San Francisco-Oakland-San Jose, California - All Urban Consumers. If the manner in which the CPI is calculated shall be substantially revised, Landlord and Tenant shall select a means to adjust such revised Index which would produce results equivalent, as practicable, to those which would have been obtained if the CPI had not been so revised. If the CPI shall become unavailable to the public because publication is discontinued, or otherwise. Landlord and Tenant shall select a comparable substitute index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency, or if no such index shall then be available, a comparable index published by a major bank or other financial institution or by a university or a recognized financial publication. In the event the U.S. Department of Labor, Bureau of Labor Statistics changes the publication frequency of the CPI so that a CPI is not available to make an adjustment for the period in question, the adjustment shall be based on the percentage increase in the CPI for the twelve (12) month period beginning with the closest month preceding the period in question for which a CPI is available.
|
3.
|
Additional Security Deposit.
No Security Deposit shall be required in connection with this Amendment.
|
4.
|
Improvements to Premises.
|
4.1
|
Condition of Premises
. Tenant is in possession of the Premises and accepts the same “as is” without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements, except as may be expressly provided otherwise in this Amendment. Tenant hereby acknowledges and agrees that Landlord has fulfilled all of its obligations pursuant to Exhibit “C” to the Lease.
|
4.2
|
Responsibility for
Improvements to Premises.
Any construction, alterations or improvements to the Premises shall be performed by Tenant at its sole cost and expense using contractors selected by Tenant and approved by Landlord in accordance with the terms and conditions of the Lease and shall be further governed in all respects by the provisions of Article IX (Repairs and Alterations) of the Lease.
|
5.
|
Lease Modifications.
|
5.1
|
Insurance.
As of the date hereof, Article XV (Insurance) is hereby revised to delete the 4
th
to last sentence and replace the same with the following: “All policies of Tenant’s insurance shall contain endorsements that the insurer(s) shall give
Landlord and its designee no less than ten (10) days written notice prior to cancellation for failure to pay premiums. Tenant shall provide to Landlord no less than ten (10) days written notice prior to: (i) cancellation of any of Tenant’s insurance carried hereunder for any reason whatsoever, and (ii) material adverse change in any such coverage.”
|
5.2
|
Event of Default.
Article XIX(E) of the Lease is hereby deleted in its entirety and shall be
of no further force or effect.
|
5.3
|
Holding Over.
Article XXIV (Holding Over) of the Lease is hereby modified by deleting the second sentence and replacing the following language therefor: “Tenant’s occupancy of the Premises during the holdover shall be subject to all the terms and provision of this Lease and Tenant shall pay an amount (on a per month basis without reduction for partial months during the holdover) equal to one hundred fifty percent (150%) of the Monthly Base Rent due for the period immediately preceding the holdover”.
|
6.
|
Other Pertinent Provisions.
Landlord and Tenant agree that, effective as of the date of this Amendment (unless different effective date(s) is/are specifically referenced in this Section), the Lease shall be amended in the following additional respects:
|
6.1
|
Landlord Notice Address.
Landlord's address set forth in Section I of the Basic Lease Information of the Lease is hereby deleted in its entirety and replaced with the following:
|
“RAR2-Clearview Business Park Owner, LLC
|
c/o Deutsche Asset & Wealth Management
|
101 California Street, 24th Floor
|
San Francisco, CA 94111
|
Attn: Asset Manager
|
|
with a copy to:
|
|
c/o Embarcadero Capital Partners LLC
|
1301 Shoreway Road, Suite250
|
Belmont, CA 94002”
|
6.2
|
Landlord's Address for Payment of Rent.
Landlord's address for payment of Rent set forth in Section J of the Basic Lease Information of the Lease is hereby deleted in its entirety and replaced with the following:
|
RAR2-Clearview Business Park Owner, LLC
|
P.O. Box 209238
|
Austin, TX 78720-9238
|
6.3
|
Tenant Notice Address.
Tenant's address for all notices under the Lease are as follows:
|
GoPro, Inc.
|
3000 Clearview Way
|
San Mateo, CA 94402
|
Attn: General Counsel
|
|
with a copy to:
|
|
GoPro, Inc.
|
3000 Clearview Way
|
San Mateo, CA 94402
|
Attn: Vice President, Workplace
|
|
with a copy to:
|
|
Jones Lang LaSalle
|
4085 Campbell Avenue, Suite 150
|
Menlo Park, CA 94025
|
Attn: Rich Branning, Managing Director
|
7.1
|
This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment.
|
7.2
|
Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect. In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control. The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.
|
7.3
|
Tenant shall reasonably comply with Landlord's recycling policy for the Building, including, without limitation, Tenant shall sort and separate its trash into separate recycling containers as required by law or which may be furnished by Landlord and located in the Premises. Tenant shall comply with all laws regarding the collection, sorting, separation, and recycling of garbage, waste products, trash and other refuse at the Building. Landlord reserves the right to refuse to collect or accept from Tenant any trash that is not separated and sorted as required by law or pursuant to Landlord's recycling policy, and to require Tenant to arrange for such collection at Tenant's cost, utilizing a contractor reasonably satisfactory to Landlord.
|
7.4
|
Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Amendment until Landlord has executed and delivered the same to Tenant.
|
7.5
|
Tenant hereby represents to Landlord that Tenant has dealt with no broker in connection with this Amendment. Tenant agrees to indemnify and hold Landlord and the Landlord Related Parties harmless from all claims of any brokers claiming to have represented Tenant in connection with this Amendment.
|
7.6
|
Tenant hereby represents and warrants that neither Tenant, nor any persons or entities holding any legal or beneficial interest whatsoever in Tenant, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act. 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: “List of Specially Designated Nationals and Blocked Persons.” If the foregoing representation is untrue at any time during the Term, an event of default under the Lease will be deemed to have occurred, without the necessity of notice to Tenant.
|
7.7
|
Pursuant to California Civil Code Section 1938, Landlord hereby notifies Tenant that as of the date of this Amendment, the Premises have not undergone inspection by a “Certified Access Specialist” to determine whether the Premises meet all applicable construction-related accessibility standards under California Civil Code Section 55.53. To allow for compliance with building performance benchmarking and disclosure regulations, and to facilitate implementation of sustainable improvements to the Building, Tenant shall: (a) retain copies of its “utility data, which includes, but is not limited to, Tenant's utility bills and invoices pertaining to Tenant's energy, water, and trash usage at the Building during the Term (as the same may be further extended) , and (b) upon request, provide Landlord with copies of such “utility data”. Tenant further agrees, upon Landlord’s request to execute utility release forms provided by the applicable utility or municipality to expedite the data collection process.
|
7.8
|
Redress for any claim against Landlord under the Lease and this Amendment shall be limited to and enforceable only against and to the extent of Landlord’s interest in the Buildings. The obligations of Landlord under the Lease are not intended to and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its trustees or board of directors and officers, as the case may be, its investment manager, the general partners thereof, or any beneficiaries, stockholders, employees, or agents of Landlord or the investment manager, and in no case shall Landlord be liable to Tenant hereunder for any lost profits, damage to business, or any form of special, indirect or consequential damage.
|
LANDLORD:
|
||
|
|
|
RAR2-CLEARVIEW BUSINESS PARK OWNER, LLC,
|
||
a Delaware limited liability company
|
||
|
|
|
By: RAR2-Clearview Business Park Member
|
||
QRS, LLC, a Delaware limited liability company,
|
||
its Investor Member and Manager
|
||
|
|
|
By:
|
RREEF America, L.L.C.,
|
|
|
a Delaware limited liability company,
|
|
|
its Authorized Agent
|
|
|
|
|
|
By:
|
/s/ Stephen J. George
|
|
Name:
|
Stephen J. George
|
|
Title:
|
Vice President
|
|
Dated:
|
9/2, 2016
|
|
|
|
|
|
|
TENANT:
|
|
|
|
|
|
GOPRO, INC.,
|
||
a Delaware corporation
|
||
|
|
|
|
By:
|
/s/ Charles Lafrades
|
|
Name:
|
Charles Lafrades
|
|
Title:
|
VP, Finance
|
|
Dated:
|
8/19/2016
|
Date:
|
August 3, 2017
|
/s/ Nicholas Woodman
|
|
|
Nicholas Woodman
Chief Executive Officer
(Principal Executive Officer)
|
Date:
|
August 3, 2017
|
/s/ Brian McGee
|
|
|
Brian McGee
Chief Financial Officer
(Principal Financial Officer)
|
By: /s/ Nicholas Woodman
|
Nicholas Woodman
Chief Executive Officer
(Principal Executive Officer)
|
August 3, 2017
|
By: /s/ Brian McGee
|
Brian McGee
Chief Financial Officer
(Principal Financial Officer)
|
August 3, 2017
|