carg-8k_20200806.htm
false 0001494259 0001494259 2020-08-06 2020-08-06

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 6, 2020

 

CarGurus, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-38233

04-3843478

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

2 Canal Park, 4th Floor

Cambridge, Massachusetts 02141

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 354-0068

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock,
par value $0.001 per share

 

CARG

 

The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

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

 

 

 

 


 

Item 2.02

Results of Operations and Financial Condition.

On August 6, 2020, CarGurus, Inc. (the “Company”) announced its financial results for the quarter ended June 30, 2020. The full text of the press release issued by the Company in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Item 2.02 and in the press release attached as Exhibit 99.1 hereto is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

No.

  

Description

99.1

 

Press Release of CarGurus, Inc. dated August 6, 2020, reporting its financial results for the quarter ended June 30, 2020, furnished hereto.

104

 

Cover Page Interactive Data File (embedded with the Inline XBRL document).

 

1


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

CARGURUS, INC.

 

 

 

 

Date: August 6, 2020

 

By:

/s/ Jason Trevisan

 

 

 

Name: Jason Trevisan

 

 

 

Title: Chief Financial Officer and President, International

 

2

carg-ex991_6.htm

 

Exhibit 99.1

 

CarGurus Announces Second Quarter 2020 Results

Second Quarter Highlights:

 

Total revenue of $94.7 million, a decrease of (35%) year-over-year

 

GAAP operating income of $8.7 million; non-GAAP operating income of $24.7 million

 

GAAP net income of $7.1 million; non-GAAP net income of $21.3 million

 

Adjusted EBITDA of $27.5 million

CAMBRIDGE, MA:  August 6, 2020 — CarGurus, Inc. (Nasdaq: CARG), a leading global online automotive marketplace, today announced financial results for the second quarter ended June 30, 2020.

“Although our industry and our business are facing unprecedented uncertainty amidst the COVID-19 pandemic, CarGurus generated strong results in the second quarter that demonstrate our business’s flexibility and resilience,” said Langley Steinert, Founder and Chief Executive Officer of CarGurus. “Over the last several months, our employees have produced remarkable successes all while navigating work-from-home environments and often-challenging circumstances. As a result of their hard work, we continue to deliver what we believe to be market-leading innovation and return on investment to our dealer customers. Our business showed several signs of recovery in the second quarter as consumer demand increased significantly in May and June, yielding strong lead generation and helping dealers rebuild their sales pipelines. We began a broad rollout of our Realtime Performance Marketing suite, generated record engagement on our consumer financing platform, and developed additional elements of the online transaction to offer more digital retail services in our marketplace.”

COVID-19 Business Update

The COVID-19 pandemic and its adverse effects have become widespread in locations where CarGurus and its customers, suppliers and third-party business partners conduct business and, as a result, CarGurus has experienced disruptions in its operations. Within the second quarter of 2020, CarGurus implemented several cost-savings measures pursuant to an expense reduction plan approved by the CarGurus Board of Directors to address the impact of the COVID-19 pandemic on CarGurus’ business (the “Restructuring”). For example, CarGurus initiated a reduction of approximately 13% of its workforce, significantly reduced global advertising spend compared to the second quarter of 2019, ceased marketplace operations in Germany, Italy, and Spain, and halted any new international expansion efforts. Additionally, to help dealer customers impacted by the COVID-19 pandemic, CarGurus was the first major online automotive marketplace(1) in the United States, Canada and the United Kingdom to extend billings relief to its customers. Specifically, CarGurus offered United States and Canadian paying dealers fee reductions of 50%, 50%, and 20% in the months of April, May, and June, respectively. In the United Kingdom, CarGurus offered paying dealers fee reductions of 50% during each month of the second quarter. The following table depicts marketplace subscription revenue in both the U.S. and International segments for the three months and six months ending June 30, 2020 and June 30, 2019, respectively, reflecting the fee reductions.

(1)

CarGurus defines major online automotive marketplaces in: (i) the United States as CarGurus.com, AutoTrader.com, Cars.com, and TrueCar.com; (ii) Canada as www.CarGurus.ca, Kijiji.ca, and AutoTrader.ca; and (iii) the United Kingdom as CarGurus.co.uk, Motors.co.uk, AutoTrader.co.uk, Pistonheads.com, and Gumtree.com.

 


 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

Marketplace Subscription Revenue:

 

2020(1)

 

 

2019

 

 

2020

 

 

2019

 

United States

 

$

75,457

 

 

$

122,352

 

 

$

208,481

 

 

$

237,373

 

International

 

 

4,496

 

 

 

6,744

 

 

 

13,338

 

 

 

12,566

 

Total

 

$

79,953

 

 

$

129,096

 

 

$

221,819

 

 

$

249,939

 

(1) For the three months ended June 30, 2020, non-GAAP, pro forma marketplace subscription revenue for the United States, adjusted to include $44.0 million for fee reductions provided during the quarter, would have been approximately $119.5 million and non-GAAP, pro forma marketplace subscription revenue for International, adjusted to include $2.7 million for fee reductions provided during the quarter, would have been approximately $7.2 million. The impact of fee reductions for the three months ended March 31, 2020 was immaterial.

 

While the macro-economic environment makes it difficult to anticipate the many variables that are impacting the economy, the industry and CarGurus’ business, recent events are encouraging. Despite reduced consumer marketing spend in May and June, during this period CarGurus’ U.S. average monthly unique users were 36.6 million(2) compared to April’s U.S. monthly unique users of 29.0 million(2). Additionally, in May and June, CarGurus’ U.S. average monthly sessions were 93.0 million(3) compared to April’s U.S. monthly sessions of 71.7 million(3). CarGurus believes these increases in May and June, demonstrate the strength in CarGurus’ recovery and the value delivered by CarGurus to paying dealers. While CarGurus’ paying dealer count declined in the month of April, cancellations stabilized in May and the rapid recovery in traffic and leads resulted in a substantial re-acquisition of business in the last two months of the quarter. Additionally, in the second quarter of 2020, CarGurus continued to innovate as it rolled out its Realtime Performance Marketing suite product on a broad scale and experienced a record number of loan originations on its consumer financing platform.

 

(2)

Includes users from the Autolist website

(3)

Includes sessions from the Autolist website

KPI Update

CarGurus adopted a new definition of its paying dealer metric to align CarGurus’ data with an enterprise-system upgrade. CarGurus now defines a paying dealer as a dealer account with an active, paid marketplace subscription at the end of a defined period. CarGurus had previously defined a paying dealer as a dealer, based on a distinct associated inventory feed, that subscribes to one of CarGurus’ paid Listings packages or Dealer Display advertising and audience targeting products at the end of a defined period. The enterprise-system upgrade and overhaul of its data architecture have provided CarGurus with improved accuracy in dealer-level data and is expected to yield improved efficiency in sales account management. CarGurus also completed a data-reconciliation effort to align its historical data to the new structure. After adjusting for the new definition, and taking into account the reconciled data, CarGurus has restated certain prior period paying dealer metrics. Due to the overhaul of the system’s architecture, CarGurus does not have the ability to restate paying dealer count metrics for periods prior to the end of the third quarter of 2019. As a result, the following table represents the number of paying dealers in both the U.S. and International segments reflecting the revised paying dealer definition as well as the reconciled data on each of September 30, 2019, December 31, 2019, March 31, 2020 and June 30, 2020.

 

 

 

At September 30,

 

 

At December 31,

 

 

At March 31,

 

 

At June 30,

 

 

Number of Paying Dealers

 

2019

 

 

2019

 

 

2020

 

 

2020

 

 

United States

 

 

26,163

 

 

 

26,289

 

 

 

25,723

 

(1)

 

23,806

 

(1)

International

 

 

6,923

 

 

 

7,329

 

 

 

7,537

 

 

 

6,452

 

 

Total

 

 

33,086

 

 

 

33,618

 

 

 

33,260

 

 

 

30,258

 

 

(1) Includes paying dealers from the Autolist website

 

 

To offer additional insight regarding the business, the table below depicts marketplace subscription revenue in both the U.S. and International segments for each of the six most recent fiscal quarters ending with the quarter ended June 30, 2020. CarGurus intends to provide marketplace subscription revenue by segment in future quarters.


 

 

 

Three Months Ended

 

 

 

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

 

March 31,

 

 

June 30,

 

Marketplace Subscription Revenue:

 

2019

 

 

2019

 

 

2019

 

 

2019

 

 

2020(1)

 

 

2020(1)

 

United States

 

$

115,021

 

 

$

122,352

 

 

$

127,806

 

 

$

131,550

 

 

$

133,024

 

 

$

75,457

 

International

 

 

5,822

 

 

 

6,744

 

 

 

7,736

 

 

 

9,012

 

 

 

8,842

 

 

 

4,496

 

Total

 

$

120,843

 

 

$

129,096

 

 

$

135,542

 

 

$

140,562

 

 

$

141,866

 

 

$

79,953

 

(1) For the three months ended June 30, 2020, non-GAAP, pro forma marketplace subscription revenue for the United States, adjusted to include $44.0 million for fee reductions provided during the quarter, would have been approximately $119.5 million and non-GAAP, pro forma marketplace subscription revenue for International, adjusted to include $2.7 million for fee reductions provided during the quarter, would have been approximately $7.2 million. The impact of fee reductions for the three months ended March 31, 2020 was immaterial.

 

Finally, because of the updated paying dealer definition and the restatement of prior period paying dealer numbers, CarGurus is not providing Average Annual Revenue per Subscribing Dealer (“AARSD”) for the second quarter of 2020 and does not intend to provide AARSD for future quarters. However, the table below depicts a related metric, Quarterly Average Marketplace Revenue per Subscribing Dealer (“QARSD”) which CarGurus expects to report moving forward, as of December 31, 2019, March 31, 2020 and June 30, 2020. CarGurus defines QARSD, which is measured at the end of a fiscal quarter, as the marketplace subscription revenue during that quarter divided by the average number of paying dealers in that marketplace during the same quarter.  CarGurus calculates the average number of paying dealers for a period by adding the number of paying dealers at the end of the prior period and the end of the current period and dividing by two. CarGurus intends to provide QARSD by segment in future quarters.

 

 

Three Months Ended

 

 

 

December 31,

 

 

March 31,

 

 

June 30,

 

Quarterly Average Revenue per Subscribing Dealer

 

2019

 

 

2020

 

 

2020(1)

 

United States

 

$

5,016

 

 

$

5,115

 

 

$

3,047

 

International

 

$

1,265

 

 

$

1,190

 

 

$

643

 

Consolidated

 

$

4,215

 

 

$

4,243

 

 

$

2,517

 

(1) For the three months ended June 30, 2020, utilizing non-GAAP, pro forma marketplace subscription revenue for such quarter instead of GAAP marketplace subscription revenue, the United States QARSD would have been approximately $4,825, the International QARSD would have been approximately $1,029, and the Consolidated QARSD would have been approximately $3,989, all of which are non-GAAP measures.

 

Revenue

 

Total revenue was $94.7 million, a decrease of (35%) compared to $145.0 million in the second quarter of 2019.

 

Marketplace subscription revenue was $80.0 million, a decrease of (38%) compared to $129.1 million in the second quarter of 2019.

 

Advertising and other revenue was $14.8 million, a decrease of (7%) compared to $15.9 million in the second quarter of 2019.

 

Total non-GAAP, pro forma revenue would have been approximately $141.5 million which is inclusive of (i) approximately $126.7 million non-GAAP, pro forma marketplace subscription revenue, and (ii) $14.8 million of GAAP advertising and other revenue.

Operating Income

 

GAAP operating income was $8.7 million, or 9% of total revenue, compared to $3.5 million, or 2% of total revenue, in the second quarter of 2019.

 

GAAP operating income includes a one-time non-recurring $4.3 million Restructuring expense, inclusive of $0.8 million of stock-based compensation expense, associated with the impact of the COVID-19 pandemic in the second quarter of 2020.

 

Non-GAAP operating income was $24.7 million, or 26% of total revenue, compared to $12.7 million, or 9% of total revenue, in the second quarter of 2019.


Net Income & Adjusted EBITDA

 

GAAP net income was $7.1 million, or $0.06 per fully diluted share during the second quarter ended June 30, 2020, compared to $6.0 million, or $0.05 per fully diluted share during the second quarter ended June 30, 2019.

 

Non-GAAP net income was $21.3 million, or $0.19 per fully diluted share during the second quarter ended June 30, 2020, compared to $11.0 million, or $0.10 per fully diluted share during the second quarter ended June 30, 2019.

 

Adjusted EBITDA, a non-GAAP metric, was $27.5 million for the second quarter ended June 30, 2020 compared to $14.5 million for the second quarter ended June 30, 2019.

Balance Sheet and Cash Flow

 

As of June 30, 2020, CarGurus had cash, cash equivalents, and short-term investments of $176.2 million and no debt.

 

CarGurus generated $24.8 million in cash from operations and $22.4 million in free cash flow, a non-GAAP metric, during the second quarter of 2020, compared to having generated $16.0 million in cash from operations and $12.4 million in free cash flow during the second quarter of 2019.

Second Quarter Business Metrics

 

U.S. revenue was $89.7 million in the second quarter of 2020, a decrease of (34%) compared to $137.0 million in the second quarter of 2019. GAAP operating income in the U.S. was $15.3 million, an increase of 9% compared to $14.1 million in the second quarter of 2019.

 

International revenue was $5.0 million in the second quarter of 2020, a decrease of (38%) compared to $8.0 million in the second quarter of 2019. GAAP operating loss in International markets was ($6.6) million, a reduction in loss of 37% compared to a loss of ($10.6) million in the second quarter of 2019.

 

Website traffic and consumer engagement metrics for the second quarter of 2020 were as follows:

 

o

U.S. average monthly unique users were 34.1 million(1), a decrease of (8%) compared to 36.9 million in the second quarter of 2019. U.S. average monthly sessions were 85.9 million(2), a decrease of (15%) compared to 101.4 million in the second quarter of 2019.

 

o

International average monthly unique users were 7.8 million, a decrease of (21%) compared to 9.8 million in the second quarter of 2019. International average monthly sessions were 17.4 million, a decrease of (28%) compared to 24.1 million in the second quarter of 2019.

 

 

(1)

Includes users from the Autolist website

 

(2)

Includes sessions from the Autolist website


Third Quarter and Full-Year 2020 Guidance

CarGurus anticipates total revenue, non-GAAP operating income, and non-GAAP earnings per share to be in the following ranges:

Third Quarter 2020:

 

Total revenue

$132 to $135 million

Non-GAAP operating income

$29 to $31 million

Non-GAAP EPS

$0.21 to $0.23

 

The third quarter 2020 non-GAAP earnings per share calculation assumes 114.1 million diluted weighted-average common shares outstanding.

Full-Year 2020:

 

Total revenue

$518 to $524 million

Non-GAAP operating income

$89 to $93 million

Non-GAAP EPS

$0.66 to $0.69

 

The full-year non-GAAP earnings per share calculation assumes 114.3 million diluted weighted-average common shares outstanding.

 

Guidance for the third quarter and full-year 2020 does not include any potential impact of foreign currency exchange gains or losses.

CarGurus has not reconciled its non-GAAP operating income guidance to GAAP operating income, or its non-GAAP EPS guidance to GAAP EPS, because stock-based compensation, amortization of intangible assets, acquisition-related expenses, and restructuring expenses, the reconciling items between such GAAP and non-GAAP financial measures, cannot be reasonably predicted due to, as applicable, the timing, amount, valuation and number of future employee equity awards, and the uncertainty relating to the timing, frequency and effect of acquisitions as well as restructuring and the significance of the resulting acquisition-related or restructuring expenses, and therefore cannot be determined without unreasonable effort. For more information regarding the non-GAAP financial measures discussed in this release, please see the reconciliations of GAAP financial measures to non-GAAP financial measures and the section titled “Non-GAAP Financial Measures and Other Business Metrics” below.

Conference Call and Webcast Information

CarGurus will host a conference call and live webcast to discuss its second quarter ended June 30, 2020 financial results and business outlook at 5:00 p.m. Eastern Time today, August 6, 2020. To access the conference call, dial (888) 220-8474 for callers in the U.S. or Canada, or (646) 828-8193 for international callers, and use the passcode 7553176. The webcast will be available live on the Investors section of CarGurus’ website at https://investors.cargurus.com.

An audio replay of the call will also be available to investors beginning at approximately 8:00 p.m. Eastern Time on August 6, 2020, until 11:59 p.m. Eastern Time on August 20, 2020, by dialing (844) 512-2921 for callers in the U.S. or Canada, or (412) 317-6671 for international callers, and entering passcode 10146279. In addition, an archived webcast will be available on the Investors section of CarGurus’ website at https://investors.cargurus.com.


About CarGurus

Founded in 2006, CarGurus (Nasdaq: CARG) is a global, online automotive marketplace connecting buyers and sellers of new and used cars. The Company uses proprietary technology, search algorithms and data analytics to bring trust and transparency to the automotive search experience and help users find great deals from top-rated dealers. CarGurus is the most visited automotive shopping site in the U.S. (source: Comscore Media Metrix® Multi-Platform, Automotive – Information/Resources, Total Audience, Q2 2020, U.S. (Competitive set includes: CarGurus.com, Autotrader.com, Cars.com, TrueCar.com)). In addition to the United States, CarGurus operates online marketplaces under the CarGurus brand in Canada and the United Kingdom. In the United States and the United Kingdom, CarGurus also operates the Autolist and PistonHeads online marketplaces, respectively, as independent brands. To learn more about CarGurus, visit www.cargurus.com.  CarGurus® is a registered trademark of CarGurus, Inc.

© 2020 CarGurus, Inc., All Rights Reserved.

Cautionary Language Concerning Forward-Looking Statements

This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance for the third quarter 2020 and full-year 2020, our business and strategy, our ability to help our dealer customers and consumers, the impact of fee reductions that we have provided, our expectations for our enterprise-system upgrade and overhaul of our data architecture to yield improved efficiency in sales account management, and the impact of the COVID-19 pandemic on our business and financial results, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “guide,” “intend,” “likely,” “may,” “will” and similar expressions and their negatives are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, risks related to our growth and ability to grow our revenue, our relationships with dealers, competition in the markets in which we operate, market growth, our ability to innovate, our ability to realize benefits from our acquisitions and successfully implement the integration strategies in connection therewith, natural disasters, epidemics or pandemics, like COVID-19 that has negatively impacted our business, our ability to realize cost savings and achieve other benefits for our business from our expense reduction efforts, our ability to operate in compliance with applicable laws, as well as other risks and uncertainties as may be detailed from time to time in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and other reports we file with the Securities and Exchange Commission. Moreover, we operate in very competitive and rapidly changing environments. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee that future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.

 


Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

At

June 30,

2020

 

 

At

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

133,199

 

 

$

59,920

 

Investments

 

 

43,000

 

 

 

111,692

 

Accounts receivable, net of allowance for doubtful accounts of $672

   and $240, respectively

 

 

16,844

 

 

 

22,124

 

Prepaid expenses and prepaid income taxes

 

 

11,141

 

 

 

10,452

 

Deferred contract costs

 

 

9,652

 

 

 

9,544

 

Other current assets

 

 

1,849

 

 

 

4,972

 

Restricted cash

 

 

396

 

 

 

250

 

Total current assets

 

 

216,081

 

 

 

218,954

 

Property and equipment, net

 

 

26,881

 

 

 

27,950

 

Intangible assets

 

 

10,599

 

 

 

3,920

 

Goodwill

 

 

27,623

 

 

 

15,207

 

Operating lease right-of-use assets

 

 

66,086

 

 

 

59,986

 

Restricted cash

 

 

10,627

 

 

 

10,553

 

Deferred tax assets

 

 

37,206

 

 

 

42,713

 

Deferred contract costs, net of current portion

 

 

8,825

 

 

 

10,514

 

Other non-current assets

 

 

3,508

 

 

 

3,826

 

Total assets

 

$

407,436

 

 

$

393,623

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,438

 

 

$

36,731

 

Accrued expenses, accrued income taxes and other current liabilities

 

 

12,991

 

 

 

18,262

 

Deferred revenue

 

 

8,195

 

 

 

9,984

 

Operating lease liabilities

 

 

11,523

 

 

 

8,781

 

Total current liabilities

 

 

43,147

 

 

 

73,758

 

Operating lease liabilities

 

 

65,073

 

 

 

60,818

 

Deferred tax liabilities

 

 

314

 

 

 

284

 

Other non–current liabilities

 

 

3,047

 

 

 

1,908

 

Total liabilities

 

 

111,581

 

 

 

136,768

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

      Preferred stock, $0.001 par value; 10,000,000 shares authorized;

         no shares issued and outstanding

 

 

 

 

 

 

Class A common stock, $0.001 par value per share; 500,000,000 shares

   authorized; 92,862,607 and 91,819,649 shares issued and outstanding

   at June 30, 2020 and December 31, 2019, respectively

 

 

93

 

 

 

92

 

Class B common stock, $0.001 par value per share; 100,000,000 shares

   authorized; 19,975,155 and 20,314,644 shares issued and outstanding

   at June 30, 2020 and December 31, 2019, respectively

 

 

20

 

 

 

20

 

Additional paid-in capital

 

 

224,418

 

 

 

205,234

 

Retained earnings

 

 

71,686

 

 

 

51,859

 

Accumulated other comprehensive loss

 

 

(362

)

 

 

(350

)

Total stockholders’ equity

 

 

295,855

 

 

 

256,855

 

Total liabilities and stockholders’ equity

 

$

407,436

 

 

$

393,623

 

 


Unaudited Condensed Consolidated Income Statements

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

94,737

 

 

$

145,031

 

 

$

252,426

 

 

$

280,301

 

Cost of revenue(1)

 

 

9,880

 

 

 

8,628

 

 

 

21,490

 

 

 

16,348

 

Gross profit

 

 

84,857

 

 

 

136,403

 

 

 

230,936

 

 

 

263,953

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

38,583

 

 

 

101,789

 

 

 

132,178

 

 

 

193,105

 

Product, technology, and development

 

 

21,887

 

 

 

17,346

 

 

 

44,971

 

 

 

33,318

 

General and administrative

 

 

14,158

 

 

 

12,540

 

 

 

30,018

 

 

 

24,300

 

Depreciation and amortization

 

 

1,520

 

 

 

1,180

 

 

 

3,041

 

 

 

2,247

 

Total operating expenses

 

 

76,148

 

 

 

132,855

 

 

 

210,208

 

 

 

252,970

 

Income from operations

 

 

8,709

 

 

 

3,548

 

 

 

20,728

 

 

 

10,983

 

Other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

317

 

 

 

744

 

 

 

879

 

 

 

1,488

 

Other income, net

 

 

157

 

 

 

105

 

 

 

323

 

 

 

1,007

 

Total other income, net

 

 

474

 

 

 

849

 

 

 

1,202

 

 

 

2,495

 

Income before income taxes

 

 

9,183

 

 

 

4,397

 

 

 

21,930

 

 

 

13,478

 

Provision for (benefit from) income taxes

 

 

2,052

 

 

 

(1,610

)

 

 

2,103

 

 

 

(5,113

)

Net income

 

$

7,131

 

 

$

6,007

 

 

$

19,827

 

 

$

18,591

 

Net income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

0.05

 

 

$

0.18

 

 

$

0.17

 

Diluted

 

$

0.06

 

 

$

0.05

 

 

$

0.17

 

 

$

0.16

 

Weighted-average number of shares of common

   stock used in computing net income per share

   attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

112,734,393

 

 

 

111,299,345

 

 

 

112,544,743

 

 

 

111,051,070

 

Diluted

 

 

113,737,465

 

 

 

113,388,509

 

 

 

113,947,241

 

 

 

113,398,793

 

(1) Includes depreciation and amortization expense for the three months ended June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019 of $1,837, $734, $3,306 and $1,294, respectively.

 

 


Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

7,131

 

 

$

6,007

 

 

$

19,827

 

 

$

18,591

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,357

 

 

 

1,914

 

 

 

6,347

 

 

 

3,541

 

Currency loss (gain) on foreign denominated transactions

 

 

11

 

 

 

(7

)

 

 

(91

)

 

 

(840

)

Deferred taxes

 

 

(769

)

 

 

(1,624

)

 

 

4,695

 

 

 

(5,316

)

Provision for doubtful accounts

 

 

456

 

 

 

353

 

 

 

1,658

 

 

 

368

 

Stock-based compensation expense

 

 

11,769

 

 

 

8,943

 

 

 

23,375

 

 

 

16,629

 

Amortization of deferred contract costs

 

 

2,805

 

 

 

1,804

 

 

 

5,641

 

 

 

3,634

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

252

 

 

 

(2,319

)

 

 

5,653

 

 

 

(3,838

)

Prepaid expenses, prepaid income taxes, and other assets

 

 

13,882

 

 

 

(311

)

 

 

2,835

 

 

 

(2,071

)

Deferred contract costs

 

 

(778

)

 

 

(3,392

)

 

 

(4,074

)

 

 

(7,768

)

Accounts payable

 

 

(18,477

)

 

 

2,807

 

 

 

(25,914

)

 

 

6,032

 

Accrued expenses, accrued income taxes, and other current liabilities

 

 

(944

)

 

 

2,700

 

 

 

(5,294

)

 

 

(1,309

)

Deferred revenue

 

 

3,150

 

 

 

(464

)

 

 

(1,788

)

 

 

(332

)

Lease obligations

 

 

1,619

 

 

 

(500

)

 

 

898

 

 

 

(1,880

)

Other non-current liabilities

 

 

1,323

 

 

 

133

 

 

 

1,160

 

 

 

288

 

Net cash provided by operating activities

 

 

24,787

 

 

 

16,044

 

 

 

34,928

 

 

 

25,729

 

Investing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,357

)

 

 

(2,884

)

 

 

(2,571

)

 

 

(8,584

)

Capitalization of website development costs

 

 

(1,029

)

 

 

(716

)

 

 

(1,695

)

 

 

(1,527

)

Cash paid for acquisition, net of cash acquired

 

 

 

 

 

 

 

 

(21,004

)

 

 

(19,139

)

Investments in certificates of deposit

 

 

 

 

 

(70,827

)

 

 

 

 

 

(96,527

)

Maturities of certificates of deposit

 

 

38,281

 

 

 

60,000

 

 

 

68,692

 

 

 

100,000

 

Net cash provided by (used in) investing activities

 

 

35,895

 

 

 

(14,427

)

 

 

43,422

 

 

 

(25,777

)

Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

415

 

 

 

391

 

 

 

929

 

 

 

1,088

 

Payment of finance lease obligations

 

 

(9

)

 

 

(6

)

 

 

(18

)

 

 

(12

)

Payment of withholding taxes on net share settlement of

   restricted stock units

 

 

(2,389

)

 

 

(4,637

)

 

 

(5,786

)

 

 

(8,591

)

Net cash used in financing activities

 

 

(1,983

)

 

 

(4,252

)

 

 

(4,875

)

 

 

(7,515

)

Impact of foreign currency on cash, cash equivalents, and restricted cash

 

 

52

 

 

 

40

 

 

 

24

 

 

 

17

 

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

 

 

58,751

 

 

 

(2,595

)

 

 

73,499

 

 

 

(7,546

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

85,471

 

 

 

32,607

 

 

 

70,723

 

 

 

37,558

 

Cash, cash equivalents, and restricted cash at end of period

 

$

144,222

 

 

$

30,012

 

 

$

144,222

 

 

$

30,012

 

 


Unaudited Reconciliation of GAAP Operating Income to Non-GAAP Operating Income and GAAP Operating Margin to Non-GAAP Operating Margin

(in thousands, except percentages)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019(1)

 

 

2020

 

 

2019(1)

 

GAAP operating income

 

$

8,709

 

 

$

3,548

 

 

$

20,728

 

 

$

10,983

 

Stock-based compensation expense

 

 

11,923

 

 

 

8,943

 

 

 

23,604

 

 

 

16,629

 

Amortization of intangible assets

 

 

485

 

 

 

164

 

 

 

917

 

 

 

319

 

Acquisition-related expenses

 

 

24

 

 

 

86

 

 

 

968

 

 

 

91

 

Restructuring expenses(2)

 

 

3,514

 

 

 

 

 

 

3,514

 

 

 

 

Non-GAAP operating income

 

$

24,655

 

 

$

12,741

 

 

$

49,731

 

 

$

28,022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

 

9

%

 

 

2

%

 

 

8

%

 

 

4

%

Non-GAAP operating margin

 

 

26

%

 

 

9

%

 

 

20

%

 

 

10

%

(1) In December 2019, we revised our definition of Non-GAAP operating income to exclude the impact of acquisition-related expenses. This revised definition more accurately reflects management's view of our business and financial performance. Non-GAAP operating income for the three and six months ended June 30, 2019 has been restated for comparison purposes.

 

(2) Excludes stock-based compensation expense related to the Restructuring of $753 for the three and six months ended June 30, 2020 as the amount is already included within the stock-based compensation line item.

 

 

Unaudited Reconciliation of GAAP Net Income to Non-GAAP Net Income

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019(3)

 

 

2020

 

 

2019(3)

 

GAAP net income

 

$

7,131

 

 

$

6,007

 

 

$

19,827

 

 

$

18,591

 

Stock-based compensation expense, net of tax(1)

 

 

9,419

 

 

 

7,065

 

 

 

18,647

 

 

 

13,137

 

Change in tax provision from stock-based compensation expense(2)

 

 

747

 

 

 

(2,366

)

 

 

(486

)

 

 

(7,689

)

Amortization of intangible assets

 

 

485

 

 

 

164

 

 

 

917

 

 

 

319

 

Acquisition-related expenses

 

 

24

 

 

 

86

 

 

 

968

 

 

 

91

 

Restructuring expenses(4)

 

 

3,514

 

 

 

 

 

 

3,514

 

 

 

 

Non-GAAP net income

 

$

21,320

 

 

$

10,956

 

 

$

43,387

 

 

$

24,449

 

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.19

 

 

$

0.10

 

 

$

0.39

 

 

$

0.22

 

Diluted

 

$

0.19

 

 

$

0.10

 

 

$

0.38

 

 

$

0.22

 

Shares used in non-GAAP per share calculations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

112,734

 

 

 

111,299

 

 

 

112,545

 

 

 

111,051

 

Diluted

 

 

113,737

 

 

 

113,389

 

 

 

113,947

 

 

 

113,399

 

(1) The stock-based compensation amounts reflected in the table above are tax effected at the U.S. federal statutory tax rate of 21%.

 

(2) This adjustment reflects the tax effect of differences between tax deductions related to stock compensation and the corresponding financial statement expense.

 

(3) In December 2019, we revised our definition of Non-GAAP net income to exclude the impact of acquisition-related expenses. This revised definition more accurately reflects management's view of our business and financial performance. Non-GAAP net income for the three and six months ended June 30, 2019 has been restated for comparison purposes.

 

(4) Excludes stock-based compensation expense related to the Restructuring of $753 for the three and six months ended June 30, 2020 as the amount is already included within the stock-based compensation line item.

 


 

Unaudited Reconciliation of GAAP Gross Profit to Non-GAAP Gross Profit and GAAP Gross Profit Margin to Non-GAAP Gross Profit Margin

(in thousands, except percentages)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

94,737

 

 

$

145,031

 

 

$

252,426

 

 

$

280,301

 

Cost of revenue

 

 

9,880

 

 

 

8,628

 

 

 

21,490

 

 

 

16,348

 

Gross profit

 

 

84,857

 

 

 

136,403

 

 

 

230,936

 

 

 

263,953

 

Stock-based compensation expense included in Cost of revenue

 

 

85

 

 

 

95

 

 

 

184

 

 

 

176

 

Acquisition-related expenses included in Cost of revenue

 

 

 

 

 

 

 

 

22

 

 

 

 

Restructuring expenses included in Cost of revenue

 

 

1,051

 

 

 

 

 

 

1,051