UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X]
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2020
or
[
]
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from
to
Commission file number 1-34761
AutoWeb, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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33-0711569
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification Number)
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400 North Ashley Drive, Suite 300
Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:
(949)
225-4500
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, par value $0.001 per share
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AUTO
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The Nasdaq Capital Market
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Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☒
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Emerging growth company ☐
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If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial
accounting standards pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
As
of May 5, 2020, there were 13,146,831 shares of the
Registrant’s Common Stock, $0.001 par value,
outstanding.
INDEX
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Page
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PART I. FINANCIAL INFORMATION
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2
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3
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4
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5
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16
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20
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20
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PART II. OTHER INFORMATION
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21
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23
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24
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PART I. FINANCIAL
INFORMATION
Item
1. Financial
Statements
AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
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March 31,
2020
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December 31,
2019
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Assets
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Current
assets:
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Cash
and cash equivalents
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$7,354
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$892
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Restricted
cash
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502
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5,054
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Accounts
receivable, net of allowances for bad debts and customer credits of
$759 and $740 at March 31, 2020 and December 31, 2019,
respectively
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20,820
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24,051
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Prepaid
expenses and other current assets
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1,168
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1,265
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Total
current assets
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29,844
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31,262
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Property
and equipment, net
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3,100
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3,349
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Right-of-use
assets
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3,633
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2,528
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Intangible
assets, net
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6,244
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7,104
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Other
assets
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764
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661
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Total
assets
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$43,585
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$44,904
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Liabilities and Stockholders’ Equity
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Current
liabilities:
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Accounts
payable
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$12,525
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$14,080
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Borrowings
under revolving credit facility
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6,712
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3,745
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Accrued
employee-related benefits
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1,345
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1,004
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Other
accrued expenses and other current liabilities
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1,696
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2,315
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Current
portion of lease liabilities
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1,057
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1,167
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Total
current liabilities
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23,335
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22,311
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Lease
liabilities, net of current portion
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2,706
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1,497
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Total
liabilities
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26,041
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23,808
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Commitments
and contingencies (Note 9)
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Stockholders’
equity:
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Preferred
stock, $0.001 par value, 11,445,187 shares authorized
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—
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—
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Series
A Preferred stock, none issued and outstanding at March 31, 2020
and December 31, 2019, respectively.
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Common
stock, $0.001 par value; 55,000,000 shares authorized, and
13,146,831 shares issued and outstanding at March 31, 2020 and
December 31, 2019, respectively
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13
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13
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Additional
paid-in capital
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364,537
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364,028
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Accumulated
deficit
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(347,006)
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(342,945)
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Total
stockholders’ equity
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17,544
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21,096
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Total
liabilities and stockholders’ equity
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$43,585
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$44,904
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See accompanying notes to unaudited condensed consolidated
financial statements.
AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per-share data)
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Three Months Ended
March 31,
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2020
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2019
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Revenues:
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Lead
generation
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$18,460
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$25,698
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Digital
advertising
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6,012
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5,878
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Other
revenues
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—
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28
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Total
revenues
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24,472
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31,604
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Cost
of revenues
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19,115
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25,847
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Gross
profit
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5,357
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5,757
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Operating
expenses:
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Sales
and marketing
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2,132
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2,878
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Technology
support
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1,857
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2,780
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General
and administrative
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3,943
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4,290
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Depreciation
and amortization
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722
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1,239
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Total
operating expenses
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8,654
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11,187
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Operating
loss
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(3,297)
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(5,430)
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Interest
and other (expense) income:
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Interest
(expense) income, net
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(832)
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1
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Other
income (expense)
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68
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69
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Loss
before income tax provision
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(4,061)
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(5,360)
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Net
loss
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$(4,061)
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$(5,360)
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Basic
loss per common share
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$(0.31)
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$(0.41)
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Diluted
loss per common share
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$(0.31)
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$(0.41)
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See accompanying notes to unaudited condensed consolidated
financial statements.
AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(Amounts in thousands, except share data)
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Three Months Ended March 31, 2020
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Common
Stock
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Preferred
Stock
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Additional
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Number
of
Shares
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Amount
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Number
of
Shares
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Amount
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Paid-In
Capital |
Accumulated Deficit
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Total
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Balance
at December 31, 2019
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13,146,831
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$13
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—
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$—
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$364,028
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$(342,945)
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$21,096
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Share-based
compensation
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—
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—
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—
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—
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509
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—
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509
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Net
loss
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—
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—
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—
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—
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—
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(4,061)
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(4,061)
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Balance
at March 31, 2020
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13,146,831
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$13
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—
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$—
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$364,537
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$(347,006)
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$17,544
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Three Months Ended March 31, 2019
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Common
Stock
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Preferred
Stock
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Additional
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Number
of
Shares
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Amount
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Number
of
Shares
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Amount
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Paid-In
Capital
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Accumulated Deficit
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Total
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Balance
at December 31, 2018
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12,960,450
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$13
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—
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$—
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$361,218
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$(327,716)
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$33,515
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Share-based
compensation
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—
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—
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—
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—
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551
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—
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551
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Issuance
of common stock upon exercise of stock options
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156,012
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—
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—
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—
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307
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—
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307
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Net
loss
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—
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—
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—
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—
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—
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(5,360)
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(5,360)
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Balance
at March 31, 2019
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13,116,462
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13
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—
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$—
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$362,076
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$(333,076)
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$29,013
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See accompanying notes to unaudited condensed consolidated
financial statements.
AUTOWEB, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Amounts in thousands)
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Three Months Ended
March 31,
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2020
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2019
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Cash
flows from operating activities:
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Net
loss
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$(4,061)
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$(5,360)
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Adjustments
to reconcile net loss to net cash used in operating
activities:
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Depreciation
and amortization
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1,212
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1,787
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Provision
for bad debts
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12
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41
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Provision
for customer credits
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92
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74
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Share-based
compensation
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509
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551
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Right-of-use
assets
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396
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445
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Lease
liabilities
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(402)
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(446)
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Changes
in assets and liabilities:
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Accounts
receivable
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3,127
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3,698
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Prepaid
expenses and other current assets
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97
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64
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Other
assets
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(103)
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6
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Accounts
payable
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(1,555)
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(1,023)
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Accrued
expenses and other current liabilities
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(278)
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(1,954)
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Net
cash used in operating activities
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(954)
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(2,117)
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Cash
flows from investing activities:
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Purchases
of property and equipment
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(103)
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(57)
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Net
cash used in investing activities
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(103)
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(57)
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Cash
flows from financing activities:
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Proceeds
from exercise of stock options
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—
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307
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Payment
on convertible note
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—
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(1,000)
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Borrowings
under PNC credit facility
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28,564
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—
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Payments
under PNC credit facility
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(32,308)
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—
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Borrowings
under CNC credit facility
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8,001
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—
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Payments
under CNC credit facility
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(1,290)
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—
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Net
cash provided by (used in) financing activities
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2,967
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(693)
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Net
increase in cash and cash equivalents and restricted
cash
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1,910
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(2,867)
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Cash
and cash equivalents and restricted cash, beginning of
period
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5,946
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13,600
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Cash
and cash equivalents and restricted cash, end of
period
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$7,856
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$10,733
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Reconciliation
of cash and cash equivalents and restricted cash
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Cash
and cash equivalents at beginning of period
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$892
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$13,600
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Restricted
cash at beginning of period
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5,054
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—
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Cash
and cash equivalents and restricted cash at beginning of
period
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$5,946
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$13,600
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Cash
and cash equivalents at end of period
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$7,354
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$10,733
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Restricted
cash at end of period
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502
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—
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Cash
and cash equivalents and restricted cash at beginning of
period
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$7,856
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$10,733
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Supplemental
disclosure of cash flow information:
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Cash
paid for income taxes
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$—
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$1
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Cash
refunds for income taxes
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$381
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$—
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Cash
paid for interest
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$323
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$20
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Supplemental
disclosure of non-cash financing activities:
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Right-of-use
assets obtained in exchange for operating lease
liabilities
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$1,501
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$—
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See accompanying notes to unaudited condensed consolidated
financial statements.
AUTOWEB, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Operations
AutoWeb, Inc. (“AutoWeb” or the “Company”) is a digital marketing company for
the automotive industry that assists automotive retail dealers
(“Dealers”) and
automotive manufacturers (“Manufacturers”) market and sell
new and used vehicles to consumers by utilizing the Company’s
digital sales enhancing products and services.
The Company’s consumer-facing websites
(“Company
Websites”) provide
consumers with information and tools to aid them with their
automotive purchase decisions and the ability to connect with
Dealers regarding purchasing or leasing vehicles
(“Leads”). The
Company’s click traffic referral program provides consumers
who are shopping for vehicles online with targeted offers based on
make, model and geographic location. As these consumers conduct
online research on Company Websites or on the site of one of our
network of automotive publishers, they are presented with relevant
offers on a timely basis and, upon the consumer clicking on the
displayed advertisement, are sent to the appropriate website
location of one of the Company’s Dealer, Manufacturer or
advertising customers.
The
Company was incorporated in Delaware on May 17, 1996. The
Company’s common stock is listed on The NASDAQ Capital Market
under the symbol AUTO.
2.
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements are presented on the same basis as the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2019 (“2019 Form 10-K”)
filed with the Securities and Exchange Commission
(“SEC”). AutoWeb has made its
disclosures in accordance with U.S. generally accepted accounting
principles (“GAAP”) for interim financial information and
with the instructions to Form 10-Q and Rule 8-03 of Regulation
S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. In the opinion of Company management, all
adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation with respect to interim financial
statements, have been included. The unaudited condensed
consolidated statement of operations and cash flows for the period
ended March 31, 2020 are not necessarily indicative of the
results of operations or cash flows expected for the year or any
other period. The unaudited condensed consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and the notes thereto in the 2019
Form 10-K.
References
to amounts in the consolidated financial statement sections are in
thousands, except share and per share data, unless otherwise
specified.
As
of December 31, 2019, restricted cash primarily consisted of
pledged cash pursuant to the PNC Credit Agreement (discussed in
Note 11). As of March 31, 2020, the restricted cash primarily
relates to cash pledged to secure credit card
liabilities.
In early 2020 and
continuing as of the date of this Quarterly Report on Form 10-Q,
the COVID-19 pandemic has led to quarantines and
stay-at-home/work-from-home orders in a number of countries,
states, cities and regions and the closure or limited access to
public and private offices and facilities, worldwide, causing
widespread disruptions to travel, economic activity and financial
markets. We are unable to
predict the extent and duration of these disruptions, which could
result in a national or global recession. The pandemic has
led the Company’s Manufacturer and Dealer customers to
experience disruptions in the (i) supply of vehicle and parts
inventories, (ii) ability and willingness of consumers to visit
automotive dealerships to purchase or lease vehicles and (iii)
overall health and availability of their labor force. Manufacturers
have also shutdown assembly plants. Volatility in the financial
markets, concerns about exposure to the novel coronavirus and
governmental quarantines, stay-at-home/work-from-home orders,
business closures, and employment furloughs and layoffs have also
impacted consumer confidence and willingness to visit dealerships
and to purchase or lease vehicles. High unemployment and lower
consumer confidence may continue after the
stay-at-home/work-from-home orders have ended. These disruptions
have impacted the willingness or desire of the Company’s
customers to acquire vehicle Leads or other digital marketing
services from the Company. Vehicle sales have declined, and the
Company is experiencing direct disruptions in its operations due to
the overall health of, and concerns for, our labor force and as a
result of governmental “social distancing” programs,
quarantines, travel restrictions and stay-at-home/work-from-home
orders, leading to office closures, operating from employee homes
and restrictions on our employees traveling to our various offices.
The Company is experiencing cancellations or suspensions of
purchases of Leads and other digital marketing services by our
customers, which materially and adversely affects our business,
results of operations, financial condition, earnings per share,
cash flow and the trading price of our common
stock.
3.
Recent Accounting Pronouncements
The
Company has reviewed all recently issued accounting pronouncements
and concluded that they were either not applicable or not expected
to have a material impact to its consolidated financial
statements.
4.
Revenue Recognition
Revenue is recognized upon transfer of control of
promised goods or services to the Company’s customers, or
when the Company satisfies any performance obligations under
contract. The amount of revenue recognized reflects the
consideration the Company expects to be entitled to in exchange for
respective goods or services provided. Further, under ASC 606,
“Revenue from Contracts with
Customers,”
(“ASC 606”)
contract assets or contract liabilities that arise from past
performance but require a further performance before the obligation
can be fully satisfied must be identified and recorded on the
balance sheet until respective settlements have been
met.
The
Company has two main revenue sources – Lead generation and
digital advertising. Accordingly, the Company recognizes revenue
for each source as described below:
●
Lead
generation – paid by Dealers, Manufacturers and other third
parties participating in the Company’s Lead programs and
comprised of Lead transaction and/or monthly subscription fees.
Lead generation is recognized in the period when service is
provided.
●
Digital
advertising – fees paid by Dealers, Manufacturers and
third-party wholesale suppliers for (i) the Company’s click
traffic program, (ii) display advertising on the Company’s
websites and (iii) email and other direct marketing. Revenue is
recognized in the period advertisements are displayed on the
Company’s websites or the period in which clicks have been
delivered, as applicable. The Company recognizes revenue from the
delivery of action-based advertisement (including email and other
direct marketing) in the period in which a user takes the action
for which the marketer contracted with the Company. For advertising
revenue arrangements where the Company is not the principal, the
Company recognizes revenue on a net basis.
Variable Consideration
Leads
are generally sold with a right-of-return for services that do not
meet customer requirements as specified by the relevant contract.
Rights-of-return are estimable, and provisions for estimated
returns are recorded as a reduction in revenue by the Company in
the period revenue is recognized, and thereby accounted for as
variable consideration. The Company includes the allowance for
customer credits in its net accounts receivable balances on the
Company’s balance sheet at period end. Allowance for customer
credits approximated $229,000 and $194,000 as of March 31, 2020 and
December 31, 2019, respectively.
Contract Assets and Contract Liabilities
Unbilled Revenue
Timing
of revenue recognition may differ from the timing of invoicing to
customers. The Company records a receivable when revenue is
recognized prior to invoicing. From time to time, the Company may
have balances on its balance sheet representing revenue that has
been recognized by the Company upon satisfaction of performance
obligations and earning a right to receive payment. These not-yet
invoiced receivable balances are driven by the timing of
administrative transaction processing, and are not indicative of
partially complete performance obligations, or unbilled
revenue.
Deferred Revenue
The
Company defers the recognition of revenue when cash payments are
received or due in advance of satisfying the Company’s
performance obligations, including amounts which are refundable.
Such activity is not typical for the Company. The Company had zero
deferred revenue included in its consolidated balance sheets as of
March 31, 2020 and December 31, 2019. Payment terms and conditions
can vary by contract type. Generally, payment terms within the
Company’s customer contracts include a requirement of payment
within 30 to 60 days from date of invoice. Typically, customers
make payments after receipt of invoice for billed services, and
less typically, in advance of rendered services.
The
Company has not made any significant changes in applying ASC 606
during the three months ended March 31, 2020.
Disaggregation of Revenue
The
Company disaggregates revenue from contracts with customers by
revenue source and has determined that disaggregating revenue into
these categories sufficiently depicts the differences in the
nature, amount, timing and uncertainty of revenue
streams.
The
following table summarizes revenue from contracts with customers,
disaggregated by revenue source, for the three months ended
March 31, 2020 and 2019. Revenue is recognized net of
allowances for returns and any taxes collected from customers,
which are subsequently remitted to governmental
authorities.
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Three Months Ended
March 31,
|
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2020
|
2019
|
|
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Lead
generation
|
$18,460
|
$25,698
|
|
Digital
advertising
|
|
|
|
Clicks
|
5,349
|
5,059
|
|
Display
and other advertising
|
663
|
819
|
|
Total
digital advertising
|
6,012
|
5,878
|
|
|
|
|
|
Other
revenues
|
—
|
28
|
|
Total
revenue
|
$24,472
|
$31,604
|
5.
Net Loss Per Share and Stockholders’ Equity
Basic
net loss per share is computed using the weighted average number of
common shares outstanding during the period, excluding any unvested
restricted stock. Diluted net loss per share is computed using the
weighted average number of common shares, and if dilutive,
potential common shares outstanding, as determined under the
treasury stock and if-converted methods, during the period.
Potential common shares consist of unvested restricted stock,
common shares issuable upon the exercise of stock options and the
exercise of warrants.
The
following are the share amounts utilized to compute the basic and
diluted net loss per share for the three months ended March
31, 2020 and 2019, respectively:
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
2019
|
|
Basic
Shares:
|
|
|
|
Weighted
average common shares outstanding
|
13,146,831
|
12,984,592
|
|
Weighted
average unvested restricted stock
|
(13,333)
|
(60,001)
|
|
Basic
Shares
|
13,133,498
|
12,924,591
|
|
|
|
|
|
Diluted
Shares:
|
|
|
|
Basic
shares
|
13,133,498
|
12,924,591
|
|
Weighted
average dilutive securities
|
—
|
—
|
|
Diluted
Shares
|
13,133,498
|
12,924,591
|
For
the three months ended March 31, 2020 and 2019, the Company’s
basic and diluted net loss per share are the same because the
Company generated a net loss for the period and potentially
dilutive securities are excluded from diluted net loss per share
because they have an anti-dilutive impact.
For
the three months ended March 31, 2020 and 2019, 4.5 million and 4.1
million, respectively, of potentially anti-dilutive securities
related to common stock have been excluded from the calculation of
diluted net earnings per share.
6.
Share-Based Compensation
Share-based
compensation expense is included in costs and expenses in the
Unaudited Condensed Consolidated Statements of Operations included
in this Part I, Item 1 of this Quarterly Report on Form 10-Q as
follows:
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
Share-based
compensation expense:
|
|
|
|
Sales
and marketing
|
$32
|
$72
|
|
Technology
support
|
27
|
41
|
|
General
and administrative
|
450
|
438
|
|
Share-based
compensation costs
|
509
|
551
|
|
|
|
|
|
Total
share-based compensation costs
|
$509
|
$551
|
Service-Based
Options. The Company
granted the following service-based options for the three months
ended March 31, 2020 and 2019, respectively:
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
Number
of service-based options granted
|
460,000
|
1,042,883
|
|
Weighted
average grant date fair value
|
$1.09
|
$1.81
|
|
Weighted
average exercise price
|
$2.00
|
$3.41
|
These
options are valued using a Black-Scholes option pricing model.
Options issued to employees generally vest one-third on the first
anniversary of the grant date and ratably over twenty-four months
thereafter. The vesting of these awards is contingent
upon the employee’s continued employment with the Company
during the vesting period and vesting may be accelerated under
certain conditions, including upon a change in control of the
Company and, in the case of certain officers of the Company,
termination of employment by the Company without cause and
voluntary termination of employment by such officer with good
reason. Options issued to non-employee directors generally vest
monthly over a 12-month period and vesting may be accelerated under
certain conditions, including upon a change in control of the
Company and upon the termination of service as a director of the
Company in the event such termination of service is due to
resignation, failure to be re-elected, failure to be nominated for
re-election, or without removal for cause.
The
grant date fair value of stock options granted during these periods
was estimated using the following weighted average
assumptions:
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
Dividend
yield
|
—
|
—
|
|
Volatility
|
68%
|
65%
|
|
Risk-free
interest rate
|
1.1%
|
2.5%
|
|
Expected
life (years)
|
4.5
|
4.4
|
Stock option exercises. The following stock options were
exercised during the three months ended March 31, 2020 and 2019,
respectively:
|
|
Three Months Ended
March 31,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
Number
of stock options exercised
|
—
|
156,012
|
|
Weighted
average exercise price
|
$—
|
$1.97
|
7.
Selected Balance Sheet Accounts
Property and
Equipment. Property
and equipment consist of the following:
|
|
March 31,
2020
|
December 31,
2019
|
|
|
|
|
|
Computer
software and hardware
|
$11,724
|
$12,804
|
|
Capitalized
internal use software
|
7,060
|
5,878
|
|
Furniture
and equipment
|
1,743
|
1,743
|
|
Leasehold
improvements
|
1,613
|
1,613
|
|
|
22,140
|
22,038
|
|
Less—Accumulated
depreciation and amortization
|
(19,040)
|
(18,689)
|
|
Property
and Equipment, net
|
$3,100
|
$3,349
|
Concentration of Credit Risk
and Risks Due to Significant Customers. Financial instruments that potentially
subject the Company to concentrations of credit risk consist
primarily of cash and cash equivalents and accounts receivable.
Cash and cash equivalents are primarily maintained with high credit
quality financial institutions in the United States. Deposits held
by banks exceed the amount of insurance provided for such
deposits.
Accounts
receivable are primarily derived from fees billed to Dealers and
Manufacturers. The Company generally requires no collateral to
support its accounts receivables and maintains an allowance for bad
debts for potential credit losses.
The
Company has a concentration of credit risk with its accounts
receivable balances. Approximately 38%, or $8.2 million, of gross
accounts receivable at March 31, 2020, and approximately 34% of
total revenues for the quarter ended March 31, 2020, are
related to Urban Science Applications (which represents Acura,
Honda, Infiniti, Subaru, Toyota and Volvo), Carat Detroit (which
represents General Motors) and Media.net. For 2019, approximately
37%, or $8.6 million, of gross accounts receivable at March 31,
2019, and approximately 28% of total revenues for the quarter ended
March 31, 2019, are related to Urban Science Applications and Carat
Detroit.
Intangible
Assets. The Company
amortizes specifically identified definite-lived intangible assets
using the straight-line method over the estimated useful lives of
the assets.
The
Company’s intangible assets will be amortized over the
following estimated useful lives:
|
|
|
March 31, 2020
|
December 31, 2019
|
||||
|
Definite-lived
Intangible Asset
|
Estimated Useful Life
|
Gross
|
Accumulated Amortization
|
Net
|
Gross
|
Accumulated Amortization
|
Net
|
|
|
|
|
|||||
|
Trademarks/trade
names/licenses/ domains
|
3
– 7 years
|
$16,589
|
$(15,571)
|
$1,018
|
$16,589
|
$(15,442)
|
$1,147
|
|
Customer
relationships
|
2
– 5 years
|
19,563
|
(19,258)
|
305
|
19,563
|
(18,800)
|
763
|
|
Developed
technology
|
5
– 7 years
|
8,955
|
(6,234)
|
2,721
|
8,955
|
(5,961)
|
2,994
|
|
|
$45,107
|
$(41,063)
|
$4,044
|
$45,107
|
$(40,203)
|
$4,904
|
|
|
|
|
March 31, 2020
|
December 31, 2019
|
||||
|
Indefinite-lived
Intangible Asset
|
Estimated Useful Life
|
Gross
|
Accumulated Amortization
|
Net
|
Gross
|
Accumulated Amortization
|
Net
|
|
|
|
|
|
|
|
|
|
|
Domain
|
Indefinite
|
$2,200
|
$—
|
$2,200
|
$2,200
|
$—
|
$2,200
|
Amortization
expense is included in “Cost of revenues” and
“Depreciation and amortization” in the Unaudited
Condensed Consolidated Statements of Operations. Amortization
expense was $0.9 million and $1.4 million for the three months
ended March 31, 2020 and 2019, respectively.
Amortization
expense for the remainder of the year and for future years is as
follows:
|
Year
|
Amortization Expense
|
|
|
|
|
2020
|
$1,511
|
|
2021
|
1,499
|
|
2022
|
902
|
|
2023
|
86
|
|
2024
|
46
|
|
|
$4,044
|
Accrued Expenses and Other
Current Liabilities. Accrued expenses and other current
liabilities consisted of the following:
|
|
March 31,
2020
|
December 31,
2019
|
|
|
|
|
|
Accrued
employee-related benefits
|
$1,345
|
$1,004
|
|
Other
accrued expenses and other current liabilities:
|
|
|
|
Other
accrued expenses
|
1,181
|
1,264
|
|
Amounts
due to customers
|
337
|
355
|
|
Other
current liabilities
|
178
|
696
|
|
Total
other accrued expenses and other current liabilities
|
1,696
|
2,315
|
|
|
|
|
|
Total
accrued expenses and other current liabilities
|
$3,041
|
$3,319
|
Convertible Notes
Payable. In connection with the
acquisition of AutoUSA, LLC on January 13, 2014, the Company issued
a convertible subordinated promissory note for $1.0 million
(“AutoUSA Note”) to AutoNationDirect.com, Inc., with
interest payable at an annual rate of 6% in quarterly installments.
The entire outstanding balance of the AutoUSA Note plus accrued
interest was paid in full on January 31, 2019.
8.
Leases
The Company determines if an arrangement is a
lease at inception of the arrangement. The Company leases its
facilities and certain office equipment under operating leases that
expire on various dates through 2025. Right of use assets
(“ROU”) assets represent the Company’s
right to use an underlying asset for the lease term and lease
liabilities represent the obligation to make lease payments arising
from the lease. Operating lease ROU assets and liabilities are
recognized at the commencement date of the lease based on the
present value of lease payments over the lease term. When readily
determinable, the Company uses the implicit rate in determining the
present value of lease payments. The ROU asset also includes any
lease payments made and excludes lease incentives. Lease expense
for lease payments is recognized on a straight-line basis over the
lease term.
Lease
Liabilities. Lease
liabilities as of March 31, 2020 consist of the
following:
|
Current
portion of lease liabilities
|
$1,057
|
|
Long
term lease liabilities, net of current portion
|
2,706
|
|
Total
lease liabilities
|
$3,763
|
The
Company’s aggregate lease maturities as of March 31, 2020 are
as follows:
|
Year
|
|
|
2020
(remaining 9 months)
|
$978
|
|
2021
|
924
|
|
2022
|
791
|
|
2023
|
786
|
|
2024
|
528
|
|
Thereafter
|
197
|
|
Total
minimum lease payments
|
4,204
|
|
Less
imputed interest
|
(441)
|
|
Total
lease liabilities
|
$3,763
|
On March 11, 2020, the Company entered into a
Lease Agreement (“New Irvine
Lease”) with The Irvine
Company LLC, a Delaware limited liability company, pursuant to
which the Company will lease approximately 12,000 square feet of
office space located in Irvine, California. The term of the New
Irvine Lease will commence on or about August 1, 2020 upon
completion of tenant improvements to the premises and will continue
for a period of approximately five years, unless earlier terminated
in accordance with the terms of the New Irvine Lease. The Company
has the option to extend the term of the New Irvine Lease for one
additional period of five years. The new office space will replace
the Company’s current, approximately 39,361 square feet,
office space in Irvine, California, the lease for which expires
July 31, 2020. The Company included the New Irvine Lease on its
balance sheet and within the future minimum lease payment table
above.
Rent
expense included in operating expenses and cost of revenue was $0.5
million for the three months ended March 31, 2020 with a
weighted average remaining lease term of 2.0 years and a weighted
average discount rate of 5.5% for leases prior to December 31,
2019. For leases starting January 1, 2020, the weighted average
discount rate is 6.25%. Rent expense included in operating expenses
and cost of revenue was $0.5 million for the three months ended
March 31, 2019 with a weighted average remaining lease term of
2.3 years and a weighted average discount rate of 5.5%. In June
2017, the Company subleased one of its offices to a third party for
the remainder of the lease term which expired in February 2019.
Rent expense for the three months ended March 31, 2019 is net
of sublease income of $26,000.
9.
Commitments and Contingencies
Employment Agreements
The
Company has employment agreements and severance benefits agreements
with certain key employees. A number of these agreements require
severance payments and continuation of certain insurance benefits
in the event of a termination of the employee’s employment by
the Company without cause or by the employee for good reason (as
defined is these agreements). Stock option agreements and
restricted stock award agreements with some key employees provide
for acceleration of vesting of stock options and lapsing of
forfeiture restrictions on restricted stock in the event of a
change in control of the Company, upon termination of employment by
the Company without cause or by the employee for good reason, or
upon the employee’s death or disability.
Litigation
From
time to time, the Company may be involved in litigation matters
arising from the normal course of its business operations. Such
litigation, even if not meritorious, could result in substantial
costs and diversion of resources and management attention, and an
adverse outcome in litigation could materially and adversely affect
the Company’s business, results of operations, financial
condition and cash flows.
10.
Income Taxes
On
an interim basis, the Company estimates what its anticipated annual
effective tax rate will be and records a quarterly income tax
provision in accordance with the estimated annual rate, adjusted
accordingly by the tax effect of certain discrete items that arise
during the quarter. As the year progresses, the Company refines its
estimated annual effective tax rate based on actual year-to-date
results. This process can result in significant changes to the
Company’s estimated effective tax rate. When such activity
occurs, the in