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EXCEL - IDEA: XBRL DOCUMENT - QLIK TECHNOLOGIES INC | Financial_Report.xls |
EX-31.2 - EXHIBIT 31.2 - QLIK TECHNOLOGIES INC | c21859exv31w2.htm |
EX-32.1 - EXHIBIT 32.1 - QLIK TECHNOLOGIES INC | c21859exv32w1.htm |
EX-31.1 - EXHIBIT 31.1 - QLIK TECHNOLOGIES INC | c21859exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2011
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 001-34803
Qlik Technologies Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-1643718 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
150 N. Radnor Chester Road, Suite E220 | ||
Radnor, Pennsylvania | 19087 | |
(Address of principal executive offices) | (Zip Code) |
(888) 828-9768
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Date File required to be submitted and posted
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filed, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer. and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of October 31, 2011, there were 83,614,675 shares of the registrants common stock issued
and outstanding.
TABLE OF CONTENTS
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Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
ii
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. | Financial Statements |
QLIK TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 170,117 | $ | 158,712 | ||||
Accounts receivable, net of allowance for doubtful accounts of $898 and $807, respectively |
72,259 | 85,364 | ||||||
Prepaid expenses and other current assets |
12,011 | 7,107 | ||||||
Deferred income taxes |
527 | 527 | ||||||
Total current assets |
254,914 | 251,710 | ||||||
Property and equipment, net |
10,391 | 4,399 | ||||||
Intangible assets, net |
253 | 388 | ||||||
Goodwill |
2,876 | 2,746 | ||||||
Deferred income taxes |
4,248 | 4,248 | ||||||
Deposits and other noncurrent assets |
1,670 | 1,573 | ||||||
Total assets |
$ | 274,352 | $ | 265,064 | ||||
Liabilities and stockholders equity |
||||||||
Current liabilities: |
||||||||
Line of credit, net |
$ | 195 | $ | | ||||
Accounts payable |
4,903 | 5,627 | ||||||
Deferred revenue |
52,620 | 50,024 | ||||||
Accrued payroll and other related costs |
24,495 | 25,262 | ||||||
Accrued expenses |
17,096 | 21,391 | ||||||
Deferred income taxes |
337 | 337 | ||||||
Total current liabilities |
99,646 | 102,641 | ||||||
Long-term liabilities: |
||||||||
Deferred income taxes |
48 | 48 | ||||||
Other long-term liabilities |
7,080 | 3,185 | ||||||
Total liabilities |
106,774 | 105,874 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $0.0001 par value, 10,000,000 authorized, none issued and outstanding
at September 30, 2011 and December 31, 2010 |
| | ||||||
Common stock, $0.0001 par value, 300,000,000 shares authorized; 83,495,603 shares issued and
outstanding at September 30, 2011 and 78,752,390 shares issued and outstanding at December
31, 2010 |
8 | 8 | ||||||
Additional paid-in-capital |
171,515 | 157,928 | ||||||
(Accumulated deficit) retained earnings |
(4,335 | ) | 133 | |||||
Accumulated other comprehensive income |
390 | 1,121 | ||||||
Total stockholders equity |
167,578 | 159,190 | ||||||
Total liabilities and stockholders equity |
$ | 274,352 | $ | 265,064 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
Table of Contents
QLIK TECHNOLOGIES INC.
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
License revenue |
$ | 45,537 | $ | 30,139 | $ | 128,751 | $ | 88,905 | ||||||||
Maintenance revenue |
22,991 | 14,972 | 64,148 | 41,560 | ||||||||||||
Professional services revenue |
6,976 | 5,157 | 19,666 | 14,698 | ||||||||||||
Total revenue |
75,504 | 50,268 | 212,565 | 145,163 | ||||||||||||
Cost of revenue: |
||||||||||||||||
License revenue |
918 | 711 | 2,610 | 2,568 | ||||||||||||
Maintenance revenue |
1,678 | 965 | 4,916 | 2,673 | ||||||||||||
Professional services revenue |
5,863 | 4,458 | 17,188 | 10,924 | ||||||||||||
Total cost of revenue |
8,459 | 6,134 | 24,714 | 16,165 | ||||||||||||
Gross profit |
67,045 | 44,134 | 187,851 | 128,998 | ||||||||||||
Operating expenses: |
||||||||||||||||
Sales and marketing |
41,852 | 28,546 | 124,917 | 81,710 | ||||||||||||
Research and development |
6,427 | 3,137 | 18,270 | 8,781 | ||||||||||||
General and administrative |
16,709 | 9,289 | 51,217 | 27,495 | ||||||||||||
Total operating expenses |
64,988 | 40,972 | 194,404 | 117,986 | ||||||||||||
Income (loss) from operations |
2,057 | 3,162 | (6,553 | ) | 11,012 | |||||||||||
Other income (expense), net: |
||||||||||||||||
Interest income (expense), net |
86 | (137 | ) | 146 | (580 | ) | ||||||||||
Change in fair value of warrants |
| | | (1,962 | ) | |||||||||||
Foreign exchange gain (loss) and other income (expense), net |
761 | (3,270 | ) | (352 | ) | (3,967 | ) | |||||||||
Total other income (expense), net |
847 | (3,407 | ) | (206 | ) | (6,509 | ) | |||||||||
Income (loss) before (provision) benefit for income taxes |
2,904 | (245 | ) | (6,759 | ) | 4,503 | ||||||||||
(Provision) benefit for income taxes |
(629 | ) | (266 | ) | 2,291 | (1,595 | ) | |||||||||
Net income (loss) |
$ | 2,275 | $ | (511 | ) | $ | (4,468 | ) | $ | 2,908 | ||||||
Net income (loss) per common share: |
||||||||||||||||
Basic |
$ | 0.03 | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.01 | ||||||
Diluted |
$ | 0.03 | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.01 | ||||||
Weighted average number of common shares: |
||||||||||||||||
Basic |
83,171,163 | 68,074,996 | 81,391,156 | 34,235,347 | ||||||||||||
Diluted |
87,634,196 | 68,074,996 | 81,391,156 | 41,446,016 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
Table of Contents
QLIK TECHNOLOGIES INC.
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended September 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities |
||||||||
Net income (loss) |
$ | (4,468 | ) | $ | 2,908 | |||
Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |
||||||||
Depreciation and amortization |
2,017 | 1,203 | ||||||
Stock-based compensation expense |
6,359 | 1,917 | ||||||
Excess tax benefit from stock-based compensation |
| (329 | ) | |||||
Other non-cash items |
(497 | ) | 2,854 | |||||
Change in fair value of warrants |
| 1,962 | ||||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
13,873 | 14,217 | ||||||
Prepaid expenses and other assets |
(4,416 | ) | (1,203 | ) | ||||
Deferred revenue |
2,060 | 1,933 | ||||||
Accounts payable and other liabilities |
(3,934 | ) | (2,292 | ) | ||||
Net cash provided by operating activities |
10,994 | 23,170 | ||||||
Cash flows from investing activities |
||||||||
Purchase of property and equipment |
(6,473 | ) | (1,805 | ) | ||||
Acquisition, net of cash acquired |
(179 | ) | 193 | |||||
Net cash used in investing activities |
(6,652 | ) | (1,612 | ) | ||||
Cash flows from financing activities |
||||||||
Proceeds from public offering, net of underwriters discount and offering costs |
| 115,100 | ||||||
Proceeds from exercise and issuance of common stock options |
7,228 | 1,111 | ||||||
Borrowings (payments) on line of credit and long-term debt, net |
195 | (7,621 | ) | |||||
Excess tax benefit on stock-based compensation |
| 329 | ||||||
Net cash provided by financing activities |
7,423 | 108,919 | ||||||
Effect of exchange rates on cash |
(360 | ) | 925 | |||||
Net increase in cash and cash equivalents |
11,405 | 131,402 | ||||||
Cash and cash equivalents, beginning of period |
158,712 | 24,852 | ||||||
Cash and cash equivalents, end of period |
$ | 170,117 | $ | 156,254 | ||||
Supplemental cash flow information: |
||||||||
Cash paid during the period for interest |
$ | 58 | $ | 407 | ||||
Cash paid during the period for income taxes |
$ | 12,952 | $ | 1,046 | ||||
Non-cash investing activities: |
||||||||
Leasehold improvement allowance received under operating lease |
$ | 1,764 | $ | | ||||
Common stock issued for acquisition of business |
$ | | $ | 622 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
Table of Contents
QLIK TECHNOLOGIES INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(1) Description of Business
Qlik Technologies Inc. (We, QlikTech or the Company) has pioneered a powerful,
user-driven business intelligence solution that enables our customers to make better and faster
business decisions. Our Business Discovery platform, QlikView, combines enterprise-class analytics
and search functionality with the simplicity and ease-of-use found in office productivity software
tools for a broad set of business users. Through its wholly owned subsidiaries, the Company sells
software solutions that are powered by our in-memory associative search technology, which has
utilized rapid advances in computing power to yield significant improvement in flexibility and
performance at a lower cost than traditional business intelligence solutions.
(2) Significant Accounting Policies
Significant Accounting Policies
The Companys significant accounting policies are disclosed in the audited consolidated
financial statements for the year ended December 31, 2010 included in the Companys Annual Report
on Form 10-K (file number 001-34803), filed with the SEC on March 16, 2011. Since the date of those
financial statements, there have been no material changes to the Companys significant accounting
policies.
Basis of Presentation and Consolidation
The accompanying unaudited consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany balances and transactions have
been eliminated. Prior year amounts have been reclassified where appropriate to conform to the
current year classification for comparative purposes.
Interim Financial Statements
The accompanying interim unaudited consolidated financial statements and related disclosures
are unaudited and have been prepared in accordance with U.S. generally accepted accounting
principles (U.S. GAAP) on the same basis as the audited consolidated financial statements for the
year ended December 31, 2010 included in the Companys Annual Report on Form 10-K, filed with the
SEC on March 16, 2011 and, in the opinion of management, include all adjustments of a normal
recurring nature considered necessary to present fairly the Companys financial position and
results of operations for the three and nine months ended September 30, 2011 and 2010 and cash
flows for the nine months ended September 30, 2011 and 2010. The results of operations for the
three and nine months ended September 30, 2011 and 2010 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2011 or any other future periods.
Certain information and note disclosures normally included in the financial statements prepared in
accordance with U.S. GAAP have been condensed or omitted under the Securities and Exchange
Commissions (SEC) rules and regulations. These unaudited interim consolidated financial
statements should be read in conjunction with the audited consolidated financial statements and
accompanying notes for the year ended December 31, 2010. The accompanying unaudited consolidated
financial statements have been prepared in accordance with the instructions to the Quarterly Report
on Form 10-Q and, therefore, do not include all information and footnotes required by U.S. GAAP for
complete financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
On an ongoing basis, the Company evaluates its estimates, including those related to the
accounts receivable allowance, useful lives of long-lived assets, the recoverability of goodwill
and other intangible assets, assumptions used for the purpose of determining stock-based
compensation expense and income taxes, among others. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable, the results of
which form the basis for making judgments about the carrying value of assets and liabilities as
well as reported revenue and expenses during the periods presented.
Foreign Currency Translation
The financial statements of the Companys foreign operations are measured using the local
currency as the functional currency. The local currency assets and liabilities are translated at
the rate of exchange to the U.S. dollar on the balance sheet date and the local currency revenues
and expenses are translated at average rates of exchange to the U.S. dollar during the reporting
periods. Foreign currency transaction gains (losses) have been reflected as a component of the
Companys statements of operations and foreign currency translation gains (losses) have
been included as a component of accumulated other comprehensive income (loss). Gains and
losses from foreign currency transactions are included as a component of other income (expense),
net.
4
Table of Contents
Business Combinations
The Company recognizes all of the assets acquired, liabilities assumed and contingent
consideration at their fair value on the acquisition date. The purchase price allocation process
requires management to make significant estimates and assumptions, especially at the acquisition
date, with respect to intangible assets acquired, estimated contingent consideration payments and
pre-acquisition contingencies assumed. Unanticipated events and circumstances may occur which may
affect the accuracy or validity of such assumptions, estimates or actual results. Additionally,
any change in the fair value of the acquisition-related contingent consideration subsequent to the
acquisition date, including changes from events after the acquisition date, will be recognized in
earnings in the period of the estimated fair value change. All other changes in a valuation
allowance or uncertain tax positions are recognized as a reduction of or an increase to income tax
expense.
Acquisition-related transaction costs, including legal and accounting fees and
other external costs directly related to the acquisition, are recognized separately from the
acquisition and expensed as incurred in general and administrative expenses in the unaudited
consolidated statements of operations.
Comprehensive Income (Loss)
The Company classifies items of comprehensive income (loss) separately within stockholders
equity. For the three and nine months ended September 30, 2011 and 2010, comprehensive income
(loss) was:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income (loss) |
$ | 2,275 | $ | (511 | ) | $ | (4,468 | ) | $ | 2,908 | ||||||
Foreign currency
translation gain (loss) |
(2,739 | ) | 3,868 | (731 | ) | 3,228 | ||||||||||
Comprehensive income (loss) |
$ | (464 | ) | $ | 3,357 | $ | (5,199 | ) | $ | 6,136 | ||||||
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, other current assets,
and accounts payable approximate fair value, due to their short-term nature.
Stock-Based Compensation
The Company recognizes the cost of stock-based compensation based on the fair value of those
awards at the date of grant over the requisite service period. The Company uses the
Black-Scholes-Merton (Black-Scholes) option pricing model to determine the fair value of common
stock option awards. The fair value of a restricted stock unit is determined by using the fair
value of the Companys common stock on the date of grant. The estimated fair value of Maximum Value
Stock-Settled Stock Appreciation Rights (MVSSSARs) is determined by utilizing a lattice model
under the option pricing method. Stock-based compensation plans, related expenses and assumptions
used in the Black-Scholes option pricing model are more fully described in Note 9 to these
unaudited consolidated financial statements. The estimated fair value of stock-based compensation
awards on the date of grant is amortized on a straight-line basis over the requisite service
period. Stock-based compensation expense is recorded within cost of revenue, sales and marketing,
research and development and general and administrative expenses.
The following table sets forth the total stock-based compensation expense included in the
unaudited consolidated statements of operations for the three and nine months ended September 30,
2011 and 2010:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cost of revenue |
$ | 198 | $ | 47 | $ | 450 | $ | 99 | ||||||||
Sales and marketing |
1,459 | 424 | 3,387 | 992 | ||||||||||||
Research and
development |
281 | 21 | 414 | 63 | ||||||||||||
General and
administrative |
921 | 376 | 2,108 | 763 | ||||||||||||
$ | 2,859 | $ | 868 | $ | 6,359 | $ | 1,917 | |||||||||
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Net Income (Loss) Attributable to Common Share
The following table sets forth the computation of basic and diluted net income (loss) per
common share for the periods indicated:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Basic net income (loss) per common share calculation: |
||||||||||||||||
Net income (loss) |
$ | 2,275 | $ | (511 | ) | $ | (4,468 | ) | $ | 2,908 | ||||||
Less: Undistributed earnings allocated to
participating securities |
| | | (2,644 | ) | |||||||||||
Net income (loss) attributable to common shares |
2,275 | (511 | ) | (4,468 | ) | 264 | ||||||||||
Weighted average common shares outstanding |
83,171,163 | 68,074,996 | 81,391,156 | 34,235,347 | ||||||||||||
Basic net income (loss) per share |
$ | 0.03 | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.01 | ||||||
Diluted net income (loss) per common share calculation: |
||||||||||||||||
Net income (loss) |
$ | 2,275 | $ | (511 | ) | $ | (4,468 | ) | $ | 2,908 | ||||||
Less: Undistributed earnings allocated to
participating securities |
| | | (2,644 | ) | |||||||||||
Net income (loss) attributable to common shares |
2,275 | (511 | ) | (4,468 | ) | 264 | ||||||||||
Weighted average shares used to compute basic net
income (loss)
per share |
83,171,163 | 68,074,996 | 81,391,156 | 34,235,347 | ||||||||||||
Effect of potentially dilutive securities: |
||||||||||||||||
Share-based awards |
4,463,033 | | | 7,210,669 | ||||||||||||
Weighted average shares used to compute diluted net
income (loss)
per share |
87,634,196 | 68,074,996 | 81,391,156 | 41,446,016 | ||||||||||||
Diluted net income (loss) per share |
$ | 0.03 | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.01 | ||||||
Diluted net income (loss) per common share for the periods presented does not reflect the
following potential common shares as the effect would be anti-dilutive:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Common stock options |
2,435,118 | 13,210,456 | 9,283,114 | 1,487,932 | ||||||||||||
Restricted stock units |
| 37,500 | 44,812 | 37,500 | ||||||||||||
MVSSSARs |
357,361 | | 357,361 | | ||||||||||||
2,792,479 | 13,247,956 | 9,685,287 | 1,525,432 | |||||||||||||
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting
Standards Board (FASB) or other standard setting bodies that are adopted by the Company as of the
specified effective date. Unless otherwise discussed, the Company believes that the impact of
recently issued standards that are not yet effective will not have a material impact on its
financial position or results of operations upon adoption.
In January 2010, the FASB updated the accounting guidance related to fair value measurements
disclosures. The updated guidance (i) requires separate disclosure of significant transfers in and
out of Level 1 and Level 2 fair value measurements, (ii) requires disclosure of Level 3 fair value
measurements activity on a gross basis, (iii) clarifies existing disaggregation requirements, and
(iv) clarifies existing input and valuation technique disclosure requirements. The updated guidance
was effective for the Company for interim or annual periods beginning after January 1, 2010, except
for Level 3 fair value measurement disclosure requirements, which are effective for fiscal years
beginning after January 1, 2011. The Company adopted the aspects of the guidance on January 1, 2010
and adopted the remaining guidance on January 1, 2011. The adoption of the guidance had no material
impact on the consolidated financial statements.
In June 2010, the FASB issued an Accounting Standards Update to the Comprehensive Income Topic
in the ASC aimed at increasing the prominence of items reported in other comprehensive income in
the financial statements. This update requires companies to present comprehensive income in a
single statement below net income or in a separate statement of comprehensive income immediately
following the income statement. Companies will no longer be allowed to present comprehensive income
on the statement of changes in shareholders equity. In both options, companies must present the
components of net income, total net income, the components of other comprehensive income, total
other comprehensive income and total comprehensive income. This update does not change which items
are reported in other comprehensive income or the requirement to report reclassifications of items
from other comprehensive income to net income. This requirement will become effective for the
Company beginning with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 and
will require retrospective application for all periods presented.
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Table of Contents
In September 2011, the FASB issued an Accounting Standards Update that amends the accounting
guidance on goodwill impairment testing. This update is intended to reduce complexity and costs by
allowing companies the option to make a qualitative evaluation about the likelihood of goodwill
impairment to determine whether it should calculate the fair value of a reporting unit. The update
also improves previous guidance by expanding upon the examples of events and circumstances that a
company should consider between annual impairment tests in determining whether it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. The update is
effective for interim and annual goodwill impairment tests performed for fiscal years beginning
after December 15, 2011. The adoption of this update will not have a material impact on the
consolidated financial statements.
(3) Acquisitions
On January 22, 2010, the Company completed its acquisition of Syllogic Corporation for total
consideration of $1.1 million. The purchase price consisted of 120,000 shares of common stock
valued at $0.6 million and contingent cash consideration of $0.5 million, which is estimated to be
paid out over a four year period. The total maximum contingent cash consideration that could be
paid pursuant to the agreement is $0.8 million. For the nine months ended September 30, 2011 and
2010, the Company paid $0.1 million and $0.1 million, respectively, based on achievement of certain
financial targets.
(4) Goodwill and Other Intangible Assets
The cost of finite-lived intangible assets is amortized on a straight-line basis over their
estimated useful lives. The estimated useful lives of these assets range from one to five years.
Amortization of intangible assets was $0.1 million and $0.1 million for the three months ended
September 30, 2011 and 2010, respectively. Amortization of intangible assets was $0.2 million and
$0.2 million for the nine months ended September 30, 2011 and 2010, respectively. The estimated
aggregate amortization expense for each of the succeeding years is as follows: de minimus for the
remainder of 2011 and $0.2 million in 2012. The Company evaluates the useful lives of these assets
on a periodic basis and tests for impairments whenever events or changes in circumstances occur
that could impact the recoverability of these assets.
The change in goodwill in the unaudited consolidated balance sheet during the nine months
ended September 30, 2011 was due to foreign currency translation.
(5) Fair Value Measurements
The Company evaluates assets and liabilities subject to fair value measurements on a recurring
and nonrecurring basis to determine the appropriate level to classify them for each reporting
period. This determination requires significant judgments to be made by the Company. The Company
estimated the fair value of the Syllogic Corporation contingency using a probability-weighted
discount cash flow model. The contingency is more fully described in Note 3 to these unaudited
consolidated financial statements. This fair value was classified as Level 3 because it was based
on significant observable inputs that are supported by little or no market activity and reflect our
own assumptions. There were no material changes in fair value from December 31, 2010 to September
30, 2011.
Assets and liabilities that are measured at fair value on a non-recurring basis include
intangible assets and goodwill. These items are recognized at fair value when they are considered
to be impaired. During the three and nine months ended September 30, 2011 and the year ended
December 31, 2010, there were no fair value adjustments for assets and liabilities measured on a
non-recurring basis.
(6) Line of Credit, net
On July 25, 2011, one of the Companys subsidiaries, QlikTech India Pvt Ltd, executed a
Working Capital Facility General Terms Agreement with JPMorgan Chase Bank N.A. (the Lender),
which provides an overdraft facility for borrowings of up to 25.0 million Indian Rupees (INR)
(approximately $0.5 million based on an assumed exchange rate of 0.02 as of September 30, 2011) for
one year and is used for the purposes of funding working capital requirements. Borrowings under the
overdraft facility bear interest at the Lenders base rate (9.50% as of September 30, 2011) plus 2.75% and are payable on the last
business day of each calendar month. As of September 30, 2011, the borrowings under the overdraft
facility were approximately 9.6 million INR (approximately $0.2 million based on an assumed
exchange rate of 0.02 as of September 30, 2011) and interest incurred was de minimus.
(7) (Provision) Benefit for Income Taxes
The effective tax rate for the three months ended September 30, 2011 was a provision of 21.7%
compared to a provision of 108.6% in the prior-year period. The effective tax rate for the three
months ended September 30, 2010 reflects the recognition of certain valuation allowances, a
provision to return adjustment and a true up of the estimated annual effective tax rate during the
period. The effective tax rate for the nine months ended September 30, 2011 was a benefit of 33.9%
compared to a provision of 35.4% in the prior-year period. The Companys (provision) benefit for
income taxes was based on our estimated annual effective tax rate adjusted for the recognition of
discrete items. The Companys estimated annual effective tax rate principally includes the U.S.
federal statutory rate, state income taxes and the impact of foreign income taxed at different
rates. The Company operates in an international environment with significant operations in various
locations outside the U.S. Accordingly, the consolidated income tax rate is a composite rate
reflecting the Companys income (loss) and the applicable tax rate in the various locations where
the Company operates.
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(8) Business and Geographic Segment Information
The Company currently operates in one operating business segment, namely, the development,
commercialization and implementation of software products and related services. The Company is
managed and operated as one business. A single management team that reports to the chief operating
decision maker comprehensively manages the entire business. The Company does not operate any
material separate lines of business or separate business entities with respect to its products or
product development. Accordingly, the Company views its business and manages its operations as one
operating segment.
The following geographic data includes revenues generated by subsidiaries located within that
geographic area. The Companys revenues were generated in the following geographic regions for the
periods indicated:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
The Americas |
$ | 26,861 | $ | 15,683 | $ | 70,233 | $ | 44,205 | ||||||||
Europe |
41,974 | 30,689 | 123,979 | 89,850 | ||||||||||||
Rest of world |
6,669 | 3,896 | 18,353 | 11,108 | ||||||||||||
$ | 75,504 | $ | 50,268 | $ | 212,565 | $ | 145,163 | |||||||||
(9) Stock-Based Compensation
Common Stock Options
The following provides a summary of the common stock option activity for the Company for the
nine months ended September 30, 2011:
Weighted- | ||||||||||||||||
Average | ||||||||||||||||
Weighted- | Remaining | |||||||||||||||
Number of | Average | Contractual | Aggregrate | |||||||||||||
Shares | Exercise Price | Term (Years) | Intrinsic Value | |||||||||||||
Outstanding as of January 1, 2011 |
12,053,445 | $ | 2.95 | 6.71 | ||||||||||||
Granted |
2,184,131 | $ | 25.96 | |||||||||||||
Exercised |
(4,705,713 | ) | $ | 1.56 | ||||||||||||
Forfeited |
(247,949 | ) | $ | 12.43 | ||||||||||||
Outstanding as of September 30, 2011 |
9,283,914 | $ | 8.80 | 7.21 | $ | 128,521 | ||||||||||
Exercisable at September 30, 2011 |
4,481,572 | $ | 2.35 | 5.75 | $ | 86,490 | ||||||||||
Vested and expected to vest at
September 30, 2011 |
8,726,842 | $ | 8.42 | 7.12 | $ | 115,282 |
The Companys 2010 Equity Incentive Plan (2010 Plan) took effect on the effective date
of the registration statement, July 16, 2010, for the Companys initial public offering (IPO).
The Company initially reserved 3,300,000 shares of its common stock for issuance under the 2010
Plan. The number of shares reserved for issuance under the 2010 Plan will be increased
automatically on January 1st of each year, starting with 2011, by a number equal to the smallest of
(i) 3,300,000 shares; (ii) 3.75% of the shares of common stock outstanding at that time; or (iii) a
number of shares determined by the Companys board of directors. In February 2011, the Board of
Directors of the Company authorized an automatic increase to the 2010 Plan equal to 2,952,968
shares. As of September 30, 2011, there were 3,364,424 shares available for issuance under the 2010
Plan.
For the nine months ended September 30, 2011 and 2010, the Company issued common stock options
exercisable for 2,184,131 and 1,539,150 shares, respectively, to employees and non-employee
directors. The grant date weighted-average fair value per common stock option for the nine months
ended September 30, 2011 and 2010 was $12.28 and $3.80, respectively.
Proceeds from the exercise of common stock options were $7.2 million and $1.0 million for the
nine months ended September 30, 2011 and 2010, respectively. The total intrinsic value of common
stock options exercised during the nine months ended September 30, 2011 and 2010 was $122.4 million
and $5.7 million, respectively. For the nine months ended September 30, 2011, the Company has not
recognized any excess tax benefits on stock options exercised. The excess tax benefit will be
recorded to additional paid-in-capital when realized. The Company recognized an excess tax benefit
on such exercises for the nine months ended September 30, 2010 of $0.3 million.
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The assumptions used in the Black-Scholes option pricing model are:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
2011 | 2010 | 2011 | 2010 | |||||
Expected dividend yield |
0.0% | 0.0% | 0.0% | 0.0% | ||||
Risk-free interest rate |
1.1% 1.9% | 1.3% 2.0% | 1.1% 2.7% | 1.3% 2.7% | ||||
Expected volatility |
45.3% 46.0% | 48.8% | 45.3% 47.0% | 48.7% 50.2% | ||||
Expected life (in years) |
6.25 | 6.25 | 6.25 | 6.25 |
Since the term of the Companys historical stock data from its IPO in July 2010 is less
than the expected life of the stock options, the Company uses a peer group volatility to estimate
expected volatility in determining the fair value of its stock option grants. The peer group
volatility is consistent with the expected life of the option and includes the historical
volatility of the Companys peer group. The peer group consists of companies that are similar in
revenue size, are in the same industry or are competitors. The Company will continue to use the
peer group volatility in future periods as the Company develops additional historical experience of
its own stock price in relation to the expected life of the option. For the nine months ended
September 30, 2011, the Company has not included its own stock price volatility in a blended
volatility calculation; however, the historical volatility from the date of the Companys IPO to
the respective grant date approximates that of its peer group.
For the three months ended September 30, 2011 and 2010, the Company recorded stock-based
compensation expenses of $2.5 million and $0.8 million, respectively, related to common stock
option grants. For the nine months ended September 30, 2011 and 2010, the Company recorded
stock-based compensation expenses of $5.7 million and $1.8 million, respectively, related to common
stock option grants.
As of September 30, 2011, there was $27.6 million of total unrecognized compensation cost, net
of estimated forfeitures, related to non-vested employee and non-employee director common stock
options.
During the three months ended September 30, 2011, the Company modified the terms and
conditions of a stock option agreement in connection with the termination of a former employee. The
modification results in $1.8 million of stock-based compensation expense, which will be recognized
as the modified award vests over the 12 month period ending September 30, 2012.
Restricted Stock Units
The following provides a summary of the restricted stock unit activity for the Company as of
the nine months ended September 30, 2011:
Weighted- | ||||||||
Average | ||||||||
Number of | Grant Date | |||||||
Shares | Fair Value | |||||||
Outstanding as of January 1, 2011 |
40,820 | $ | 11.02 | |||||
Granted |
41,492 | 30.33 | ||||||
Vested |
(37,500 | ) | 10.00 | |||||
Forfeited |
| | ||||||
Unvested as of September 30, 2011 |
44,812 | $ | 29.75 | |||||
Vested and expected to vest at
September 30, 2011 |
44,812 | $ | 29.75 |
The Company grants restricted stock unit awards to its non-employee directors and
employees under the provisions of the 2010 Plan. The cost of a restricted stock unit is determined
using the fair value of the Companys common stock on the date of grant. A restricted stock unit
award entitles the holder to receive shares of the Companys common stock as the award vests.
Vesting may be based on length of service, the attainment of performance-based milestones, or a
combination of both. Stock-based compensation expense is amortized on a straight-line basis over
the vesting period.
For the nine months ended September 30, 2011, the Company granted restricted stock unit awards
for an aggregate of 41,492 shares of common stock to its non-employee directors and employees
having an aggregate value of $1.3 million. The value of a restricted stock unit award is determined
based on the closing price of the Companys stock price at the date of grant.
For the three months ended September 30, 2011 and 2010, the Company recorded stock-based
compensation expenses of $0.2 million and $0.1 million, respectively, related to restricted stock
unit awards. For the nine months ended September 30, 2011 and 2010, the Company recorded
stock-based compensation expenses of $0.5 million and $0.1 million, respectively, related to
restricted stock unit awards.
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As of September 30, 2011, there was $1.0 million of total unrecognized compensation cost, net
of estimated forfeitures, related to unvested restricted stock units. This amount will be amortized
on a straight-line basis over the requisite service period related to the restricted unit grants.
Maximum Value Stock-Settled Stock Appreciation Rights
During the three months ended September 30, 2011, the Company began to grant MVSSSARs to its
Swedish employees under the provisions of the 2010 Plan. MVSSSARs contain a predetermined cap on
the maximum stock price at which point the instrument must be exercised. At exercise, employees
holding MVSSSARs will receive shares of the Companys common stock with a value equal to the
difference between the exercise price and the then current market price per share of the Companys
common stock, subject to a predetermined cap. The exercise price of MVSSSARs is determined by using
the last sales price of the Companys common stock on the date of grant. Vesting is based on length
of service. Stock-based compensation expense is amortized on a straight-line basis over the vesting
period. The estimated fair value of MVSSSARs is determined by utilizing a lattice model under the
option pricing method.
For the nine months ended September 30, 2011, the Company granted MVSSSARs for an aggregate of
357,361 shares of common stock to its employees having an aggregate value of $2.9 million. The
grant date weighted-average fair value per MVSSSAR for the nine months ended September 30, 2011 was
$8.13. During the nine months ended September 30, 2011, no MVSSSARs were forfeited.
For the three and nine months ended September 30, 2011, the Company recorded stock-based
compensation expenses of $0.2 million related to MVSSSARs.
As of September 30, 2011, there was $2.7 million of total unrecognized compensation cost
related to unvested MVSSSARs. This amount will be amortized on a straight-line basis over the
requisite service period related to the MVSSSARs.
(10) Commitments and Contingencies
In May 2011, the Company began to occupy a new leased facility in Lund, Sweden, and
simultaneously ceased use of its previous leased facility in Lund. In July 2011, the Company
reached an agreement with the landlord of the previous leased facility to allow the Company to
terminate the lease agreement in exchange for a lease termination fee of 9.5 million Swedish kronor
(approximately $1.4 million based on an assumed exchanged rate of 0.15 as of September 30, 2011).
This lease termination fee is included in accrued expenses on the Companys unaudited consolidated
balance sheet as of September 30, 2011. In addition to the lease termination fee, the Company
incurred $0.4 million in rent charges following its abandonment of the previous leased facility as
well as an impairment charge of $0.3 million related to the write-off of leasehold improvements
from the previous leased facility. These items resulted in aggregate lease termination costs of
$2.2 million and are recorded in general and administrative expenses in the accompanying unaudited
consolidated statements of operations for the nine months ended September 30, 2011. In October
2011, the Company paid the lease termination fee.
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with the unaudited consolidated financial statements and the related
notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated
financial statements and notes thereto and managements discussion and analysis of financial
condition and results of operations for the year ended December 31, 2010 included in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 16, 2011.
This Quarterly Report on Form 10-Q contains forward-looking statements, including, but not limited
to, statements regarding the value and effectiveness of our products, the introduction of product
enhancements or additional products and our growth, expansion and market leadership, that involve
risks, uncertainties, assumptions, and other factors which, if they do not materialize or prove
correct, could cause our results to differ materially from those expressed or implied by such
forward-looking statements. All statements, other than statements of historical fact, are
statements that could be deemed forward-looking statements, including statements containing the
words predicts, plan, expects, anticipates, believes, goal, target, estimate,
potential, may, will, might, momentum, could, and similar words. We intend all such
forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in Section 21E of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, and the Private Securities Litigation Reform Act of 1995. Actual results may differ
materially from those projected in such statements due to various factors, including but not
limited to:
| risk and uncertainties inherent in our business; |
| our ability to attract new customers and retain existing customers; |
| our ability to effectively sell, service and support our products; |
| our ability to manage our international operations; |
| our ability to compete effectively; |
| our ability to develop and introduce new products and add-ons or enhancements to
existing products; |
| our ability to continue to promote and maintain our brand in a cost-effective
manner; |
| our ability to manage growth; |
| our ability to attract and retain key personnel; |
| the scope and validity of intellectual property rights applicable to our products; |
| adverse economic conditions in general and adverse economic conditions
specifically affecting the markets in which we operate; and |
| other risks discussed in the section titled Risk Factors, set forth in Part I,
Item 1A of our Annual Report on Form 10-K, the section titled Risk Factors, set
forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and elsewhere in this
Report. |
Past performance is not necessarily indicative of future results. There can be no
assurance that the actual results or developments anticipated by us will be realized or, even if
substantially realized, that they will have the expected consequences to, or effects on, us.
Therefore, no assurance can be given that the outcomes stated in such forward-looking statements
and estimates will be achieved.
The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of
the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and
developments will cause our views to change. However, while we may elect to update these
forward-looking statements at some point in the future, we undertake no intention or obligation to
update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise. You should, therefore, not rely on these forward-looking statements as
representing our views as of any date subsequent to the date of this Quarterly Report on Form
10-Q.
Introduction
Managements Discussion and Analysis of Financial Condition and Results of Operations is
provided to help provide an understanding of our financial condition and results of operations.
This item of our Quarterly Report on Form 10-Q is organized as follows:
| Overview and Key Financial Metrics and Trends. This section provides a general
description of our business, the key financial metrics that we use in assessing our
performance, and anticipated trends that we expect to affect our financial condition and
results of operations. |
| Critical Accounting Policies and Estimates. This section discusses accounting policies
that are considered important to our financial condition and results of operations. The
accounting policies require significant judgment or require estimates on our part in
applying them. Our significant accounting policies, including those considered to be
critical accounting policies, are summarized in Note 2 to the unaudited consolidated
financial statements. |
| Consolidated Results of Operations. This section provides an analysis of our results of
operations for the three and nine months ended September 30, 2011 and 2010. |
| Seasonality. This section discusses the seasonality in the sale of our products and
services. |
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| Liquidity and Capital Resources. This section provides an analysis of our cash flows
for the nine months ended September 30, 2011 and 2010, a discussion of our capital
requirements, and the resources available to us to meet those requirements. |
| Contractual Obligations and Off-Balance Sheet Arrangements. This section discusses
contractual obligations and commitments and off-balance sheet arrangements expected to have
an impact on our liquidity and cash flow in future periods. |
| Inflation. This section discusses inflation that could impact our financial condition
and results of operations. |
| Recent Accounting Pronouncements. This section provides for recent accounting
pronouncements that could impact our financial condition and results of operations. |
Overview
We have pioneered a powerful, user-driven business intelligence solution that enables our
customers to make better and faster business decisions. Our Business Discovery platform, QlikView,
combines enterprise-class analytics and search functionality with the simplicity and ease-of-use
found in office productivity software tools for a broad set of business users. QlikView is powered
by our in-memory associative search technology, which has utilized rapid advances in computing
power to yield significant improvement in flexibility and performance at a lower cost than
traditional business intelligence solutions. We have grown our customer base from over 4,000 active
customers in 2006 to approximately 22,000 active customers as of September 30, 2011 and increased
our revenue at a 48% compound annual growth rate during the same period. We added an average of
approximately 400 new customers per month during fiscal year 2010. Our solution addresses the needs
of a diverse range of customers from middle market customers to large enterprises such as Autodesk,
Campbell Soup Company, Colonial Life, The Dannon Company, Inc., Heidelberger Druckmaschinen AG,
ING, Kraft foods, Lifetime Brands, Nasdaq OMX, National Health Service (NHS), Qualcomm, Symantec
and Volvo Car UK Limited. We currently have customers in over 100 countries, and approximately 70%
and 72% of our revenue for the three and nine months ended September 30, 2011, respectively, and
approximately 75% of our revenue for the three and nine months ended September 30, 2010,
respectively, were derived internationally.
We have a differentiated business model designed to accelerate the adoption of our product by
reducing the time and cost to purchase and implement our software. Our low risk approach to product
sales, which offers free product downloads to individuals and a 30-day money back guarantee upon
purchase, provides a needed alternative to costly, all-or-nothing, traditional business
intelligence models. We initially focus on specific business users or departments within a
prospective customers organization and seek to solve a targeted business need. After demonstrating
QlikViews benefits to initial adopters within an organization, we work to expand sales of our
product to other business units, geographies and use cases with the long-term goal of broad
organizational deployment.
We license QlikView under perpetual licenses which generally include one year of maintenance
as part of the initial purchase price of the product. Our customers can renew, and generally have
renewed, their maintenance agreements for a fee that is based upon a percentage of the initial
license fee paid. For the fiscal year ended December 31, 2010, our total revenue was comprised of
64% license revenue, 26% maintenance revenue, and 10% professional services revenue. For the nine
months ended September 30, 2011, our total revenue was comprised of 61% license revenue, 30%
maintenance revenue and 9% professional services revenue. We have a diversified distribution model
that consists of a direct sales force and a partner network of resellers, OEM relationships and
systems integrators which accounted for more than 50% of our total product license and first years
maintenance billings during the three and nine months ended September 30, 2011 and 2010.
Additionally, our online QlikCommunity provides us with a loyal and growing network of users who
promote our software, provide support for other users and contribute valuable insights and feedback
for our product development efforts.
To complement QlikView, we have developed a differentiated business model that has the
following attributes:
| Broad User Focus marketing and selling QlikView directly to the business user by
providing an easy-to-use platform that can be used with minimal training. |
| Low Risk Rapid Product Adoption providing a low risk alternative to costly,
all-or-nothing, enterprise-wide deployment requirements. |
| Land and Expand Customer Penetration initially targeting business users in an
organization to create a loyal user base that promotes broad adoption of our software
platform across an organization. |
| Globally Diversified Distribution Model employing a multi-pronged international
sales approach that leverages a direct sales force and partner network. |
| Community-Based Marketing and Support augmenting our development, marketing and
support efforts through our online QlikCommunity. |
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In evaluating our operating results we focus on the productivity of our sales force, the
effectiveness of our local and corporate level marketing, our ability to close opportunities
generated by our marketing leads and the competitiveness of our technology. In each of these areas,
we have taken steps designed to improve our operating results, including undertaking additional
sales training for our sales representatives, hiring more experienced regional sales management,
investing further in our corporate website to improve its use as an effective lead generative tool,
developing a partner enablement program to focus on the results of our sales partners around the
world and expanding our research and development staff with a focus on testing and quality
assurance.
From a risk perspective, we have had to deal with the impact of the recessionary global
environment during the past several years, and the unsettled global economic environment could
affect our operating results in future periods. We have faced pricing pressure from some of our
larger competitors to which we have attempted to respond by focusing on the value delivered by
QlikView in comparison to more traditional business intelligence products, and we believe that this
has helped to minimize the loss of potential new business and existing customers from this
pressure. Also, the rapid growth in our business has required the continued hiring of experienced
staff across all of our geographic territories. To aid this effort we have focused on improving our
local recruiting initiatives, as well as developing further internal training programs to prepare
executives for greater responsibilities.
We were founded in Sweden in 1993. From 1993 until 1999, our activities were focused on
software research and development that resulted in QlikViews core technology, and from 1999 until
2004 we focused on the commercialization of our technology primarily in the Nordic market and
limited regions of Europe. In late 2004, we reincorporated in Delaware and began to broaden our
marketing and sales activities in the U.S. and continued our expansion globally.
Key Financial Metrics and Trends
Revenues
Our revenue is comprised of license, maintenance and professional services. We license our
software under perpetual licenses which generally include one year of maintenance as part of the
initial purchase price of the product. License revenue reflects the revenue recognized from sales
of licenses to new customers and additional licenses to existing customers. Historically, the
majority of our license revenues have come from new customers. However, going forward we seek to
increase the contribution from existing customers based upon our land and expand sales strategy.
Customers can renew, and generally have renewed, their maintenance agreements for a fee that is
based upon a percentage of the initial license fee paid. Current customers with maintenance
agreements are entitled to receive unspecified upgrades and enhancements when and if they become
available. We have experienced growth in maintenance revenue primarily due to increased license
sales and growth in our customer base and high retention of those customers. In 2010 and for the
nine months ended September 30, 2011, our maintenance renewal rates exceeded 85%. Professional
services revenue is comprised of training, installation and other consulting revenues. Given the
ease of implementation of our product and our relationship with our partners, professional services
revenue for the nine months ended September 30, 2011 and 2010 was approximately 9% and 10%,
respectively, of total revenue. We do not expect that proportion to change significantly during the
near term. Prior to 2009, we generated the majority of sales through our direct sales channel
rather than through our partner network. However, the contribution from our partner network
continues to grow, and we anticipate that revenues from partners will continue to be more than 50%
of total revenues. Given the size of the U.S. market and our current limited penetration there, we
expect that the U.S. will represent our largest growth opportunity during the near term and will
likely be an important contributor to future revenue growth. Due to the global diversity of our
customer base, our results are impacted by movements in the currencies of the major territories in
which we operate. The primary currencies impacting results are the U.S. dollar (our functional
currency), the Swedish kronor, the euro and the British pound. Inflation and changing prices had no
material effect on our sales, revenue or operating income (loss) from continuing operations during
the three and nine months ended September 30, 2011 and 2010.
Cost of Revenue
Cost of revenue primarily consists of personnel costs, fees paid to subcontractors providing
technical support services, referral fees paid to third parties in connection with software license
sales and other discrete professional services. Personnel costs include salaries, employee benefit
and social costs, bonuses, stock-based compensation and direct overhead.
Operating Expenses
We classify our operating expenses into three categories: sales and marketing, research and
development and general and administrative. Our operating expenses primarily consist of personnel
costs, travel costs, sales commissions, marketing program costs, facilities, legal, accounting,
consulting and other professional services costs and depreciation and amortization. Personnel costs
include salaries, employee benefit and social costs, bonuses, stock-based compensation and direct
overhead. Historically, we have focused on the continued growth of our license revenues, and as a
result, sales and marketing has represented the largest amount of total expenses both in absolute
dollar terms and as a percentage of total revenues. Going forward, we expect to drive greater
efficiencies from this cost base and consequently expect that sales and marketing as a percentage
of revenues will decline in the long term. Conversely, we project that research and development
expenses will remain constant or grow as a percentage of total revenues as we continue to invest in
future product enhancements and new products.
Sales and Marketing. Sales and marketing expenses primarily consist of personnel costs for
our sales, marketing and business development employees and executives; commissions earned by our
sales personnel; travel costs; facilities costs attributable to our sales and marketing personnel;
the cost of marketing programs; the cost of employee training programs; and the cost of business
development programs. We expect to continue to hire additional sales personnel in the U.S. and in
our international locations for the remainder of 2011.
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Research and Development. Research and development expenses primarily consist of personnel
and facility costs for our research and development and product marketing employees. We have
devoted our development efforts primarily to enhancing the functionality and expanding the
capabilities of our software platform, including, for example, the development of our QlikView
mobile client (released in 2009). We expect that our research and development expenses will
continue to increase in absolute dollars and as a percentage of revenue in the long term as we
increase our research and development and product marketing headcount to further strengthen and
enhance our software platform. The vast majority of our research and development staff is based in
Lund, Sweden.
General and Administrative. General and administrative expenses primarily consist of
personnel costs for our executive, finance, legal, human resources and administrative personnel, as
well as the cost of facilities attributable to general and administrative operations, the cost of
our annual employee summit, the cost of employee training programs, depreciation and amortization,
legal, accounting, and other professional services fees and other corporate expenses. We incurred
additional costs during the three and nine months ended September 30, 2011 and 2010 and expect to
continue to incur higher costs associated with being a public company, including higher legal,
directors and officers insurance and accounting expenses, as well as the additional costs of
achieving and then maintaining compliance with Section 404 of the Sarbanes-Oxley Act and related
regulations. We also expect that general and administrative expenses will continue to increase in
absolute dollars because of our efforts to expand our international operations, but we believe over
time general and administrative costs will decline as a percentage of revenues as we expect to
derive greater efficiencies from our corporate infrastructure.
Stock-Based Compensation. Stock-based compensation expense is based on the fair value of
those awards at the date of grant. We use the Black-Scholes-Merton (Black-Scholes) option pricing
model to determine the fair value of common stock option awards. The fair value of a restricted
stock unit is determined by using the fair value of the Companys common stock on the date of
grant. The estimated fair value of Maximum Value Stock-Settled Stock Appreciation Rights
(MVSSSARs) is determined by utilizing a lattice model under the option pricing method. The
estimated fair value of stock-based compensation awards on the date of grant is amortized on a
straight-line basis over the requisite service period. Stock-based compensation expense is recorded
within cost of revenue, sales and marketing, research and development, and general and
administrative expenses.
Other Income (Expense), net
Other income (expense), net primarily consists of net interest, foreign exchange gains
(losses) and other income or expense. Net interest represents interest income received on our cash
and cash equivalents and interest expense associated with outstanding debt. Foreign exchange gains
(losses) relate to the business activities in foreign countries and the re-measurement of
intercompany transactions denominated in currencies other than our functional reporting currency,
the U.S. dollar. As a result of our business activities in foreign countries, we expect that
foreign exchange gains (losses) will continue to occur due to fluctuations in exchange rates in the
countries where we do business.
Provision (Benefit) for Income Taxes
Provision (benefit) for income taxes primarily consists of corporate income taxes related to
income (losses) at our U.S. and international subsidiaries. The provision (benefit) includes
amounts for federal, state and foreign income taxes.
Impact of Foreign Currency Translation
Approximately 68% and 70% of our operating revenues for the nine months ended September 30,
2011 and 2010 were earned in foreign denominated currencies, including the Swedish kronor, euro and
British pound. We expect that our exposure to foreign currency exchange risk will increase to the
extent we are able to continue to expand our business internationally. For purposes of our
consolidated financial statements, local currency assets and liabilities are translated at the rate
of exchange to the U.S. dollar on the balance sheet date and local currency revenues and expenses
are translated at average rates of exchange to the U.S. dollar during the reporting period. Foreign
currency transaction gains (losses) have been reflected as a component of our results from net
income (loss) and foreign currency translation gains (losses) have been included as a component of
accumulated other comprehensive income (loss).
Our operating results for the three and nine months ended September 30, 2011 were negatively
impacted by $0.1 million and $0.9 million, respectively, by the general weakening of the U.S.
dollar relative to the euro, the British pound and the Swedish kronor.
14
Table of Contents
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation
of consolidated financial statements also requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.
We base our estimates on historical experience and on various other assumptions that we believe to
be reasonable under the circumstances. Actual results could differ significantly from the estimates
made by our management. To the extent that there are differences between our estimates and actual
results, our future financial statement presentation, financial condition, results of operations,
and cash flows will be affected. We believe that these accounting policies are critical to
understanding our historical and future performance, as these policies relate to the more
significant areas involving managements judgments and estimates. Our significant accounting
policies are disclosed in the audited consolidated financial statements for the year ended December
31, 2010 included in our Annual Report on Form 10-K, filed with the SEC on March 16, 2011. Since
the date of those financial statements, there have been no material changes to our critical
accounting policies and use of estimates.
Consolidated Results of Operations
Comparison of the Three Months Ended September 30, 2011 and 2010
Revenue
The following table sets forth revenue by source:
Three Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Percentage of | Percentage of | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Period to Period Change | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
License revenue |
$ | 45,537 | 60.3 | % | $ | 30,139 | 59.9 | % | $ | 15,398 | 51.1 | % | ||||||||||||
Maintenance revenue |
22,991 | 30.5 | % | 14,972 | 29.8 | % | 8,019 | 53.6 | % | |||||||||||||||
Professional services revenue |
6,976 | 9.2 | % | 5,157 | 10.3 | % | 1,819 | 35.3 | % | |||||||||||||||
Total revenue |
$ | 75,504 | 100.0 | % | $ | 50,268 | 100.0 | % | $ | 25,236 | 50.2 | % | ||||||||||||
Revenue was $75.5 million for the three months ended September 30, 2011 compared to $50.3
million for the three months ended September 30, 2010, an increase of $25.2 million, or 50.2%. All
territories reported strong revenue growth, particularly the Americas (includes North America and
South America), the German region (includes Germany, Austria and Switzerland), the Nordic region
(includes Sweden, Denmark, Finland and Norway), and France, which grew by 71%, 42%, 28% and 95% and
contributed an incremental $18.5 million in total revenue. License revenue grew by approximately
$15.4 million, or 51.1%. There was no material change in the pricing for our product during the
three months ended September 30, 2011. Revenue growth was achieved primarily due to volume growth
as more customers acquired our product for the first time, along with additional license purchases
by our existing customers. In addition, during the three months ended September 30, 2011, we closed
105 contracts that had total license and first years maintenance exceeding $100,000, compared to
61 contracts for the same period last year. Amounts invoiced to existing customers during the three
months ended September 30, 2011 as compared to the three months ended September 30, 2010
represented a larger share of total billings, approximately 69%, resulting from our land and
expand sales strategy. Billings from our indirect partner channel for license and first year
maintenance were 52% of total license and first year maintenance billings for the three months
ended September 30, 2011. Maintenance revenues grew by approximately 53.6% in the three months
ended September 30, 2011 as compared to the three months ended September 30, 2010 driven by annual
maintenance renewal rates of greater than 85%. Professional services revenue grew by 35.3% in the
three months ended September 30, 2011 compared to the three months ended September 30, 2010 due to
growth in consulting and training revenue, resulting from an increase in our customer base. The
revenue growth in the three months ended September 30, 2011 as compared to the three months ended
September 30, 2010 may not be indicative of our future revenue growth, if any.
15
Table of Contents
Cost of Revenue and Gross Profit
The following table sets forth cost of revenue and gross profit for each revenue source:
Three Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Percentage of | Percentage of | |||||||||||||||||||||||
Related | Related | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Period to Period Change | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Cost of Revenue: |
||||||||||||||||||||||||
Cost of license revenue |
$ | 918 | 2.0 | % | $ | 711 | 2.4 | % | $ | 207 | 29.1 | % | ||||||||||||
Cost of maintenance revenue |
1,678 | 7.3 | % | 965 | 6.4 | % | 713 | 73.9 | % | |||||||||||||||
Cost of professional services revenue |
5,863 | 84.0 | % | 4,458 | 86.4 | % | 1,405 | 31.5 | % | |||||||||||||||
Total cost of revenue |
$ | 8,459 | 11.2 | % | $ | 6,134 | 12.2 | % | $ | 2,325 | 37.9 | % | ||||||||||||
Gross Profit: |
||||||||||||||||||||||||
License revenue |
$ | 44,619 | 98.0 | % | $ | 29,428 | 97.6 | % | $ | 15,191 | 51.6 | % | ||||||||||||
Maintenance revenue |
21,313 | 92.7 | % | 14,007 | 93.6 | % | 7,306 | 52.2 | % | |||||||||||||||
Professional services revenue |
1,113 | 16.0 | % | 699 | 13.6 | % | 414 | 59.2 | % | |||||||||||||||
Total gross profit |
$ | 67,045 | 88.8 | % | $ | 44,134 | 87.8 | % | $ | 22,911 | 51.9 | % | ||||||||||||
Cost of revenue was $8.4 million for the three months ended September 30, 2011 compared
to $6.1 million for the three months ended September 30, 2010, an increase of $2.3 million, or
37.9%. Cost of license revenue largely consists of referral fees paid to third parties in
connection with software license sales. Referral fees increased $0.1 million for the three months
ended September 30, 2011 as compared to the three months ended September 30, 2010. Cost of
maintenance revenue increased $0.7 million for the three months ended September 30, 2011 as
compared to the same period in 2010. In anticipation of continued growth in our current customer
base, we increased headcount in our support organization which increased personnel costs by $0.6
million (including a $0.1 million increase in stock-based compensation) for the three months ended
September 30, 2011 as compared to the same period in 2010. In addition, other cost of maintenance
revenue increased $0.1 million for the three months ended September 30, 2011 compared to the same
period in 2010. Cost of professional services revenue increased by $1.4 million in the three months
ended September 30, 2011 as compared to the three months ended September 30, 2010 largely due to
increased consulting and other cost of professional services of $1.7 million offset by decreased
personnel costs of $0.3 million (including a $0.1 million increase in stock-based compensation).
The increase in our gross margin during the three months ended September 30, 2011 as compared to
the three months ended September 30, 2010 may not be indicative of our future gross margin.
Operating Expenses
The following table sets forth operating expenses as a percentage of revenue:
Three Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Percentage of | Percentage of | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Period to Period Change | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Sales and marketing |
$ | 41,852 | 55.4 | % | $ | 28,546 | 56.8 | % | $ | 13,306 | 46.6 | % | ||||||||||||
Research and development |
6,427 | 8.5 | % | 3,137 | 6.2 | % | 3,290 | 104.9 | % | |||||||||||||||
General and administrative |
16,709 | 22.1 | % | 9,289 | 18.5 | % | 7,420 | 79.9 | % | |||||||||||||||
Total operating expenses |
$ | 64,988 | 86.1 | % | $ | 40,972 | 81.5 | % | $ | 24,016 | 58.6 | % | ||||||||||||
Sales and Marketing. Sales and marketing expenses increased $13.3 million, or 46.6% in
the three months ended September 30, 2011 as compared to the three months ended September 30, 2010
reflecting increased personnel costs related to higher employee headcount and variable compensation
resulting from increased license revenue. The increase in sales and marketing expenses was
primarily attributable to an increase in personnel and commission costs of $9.6 million (including
a $1.0 million increase in stock-based compensation) for the three months ended September 30, 2011
as compared to the three months ended September 30, 2010. We had an increase in travel expenses of
$1.3 million during the three months ended September 30, 2011 as compared to the three months ended
September 30, 2010. In addition, we had an increase in marketing costs of $1.1 million, an increase
in facility and infrastructure costs of $0.7 million to support international expansion and an
increase in consulting and other sales and marketing costs of $0.6 million. The total increase in
sales and marketing expense includes $1.2 million from two inside sales teams. During the second
half of 2010, we formed our North American inside sales team, which represented incremental costs
of $0.6 million during the three months ended September 30, 2011 as compared to the three months
ended September 30, 2010. During the first half of 2011, we formed our European inside sales team,
which represented incremental costs of $0.6 million during the three months ended September 30,
2011 as compared to the three months ended September 30, 2010.
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Table of Contents
Research and Development. Research and development expenses grew by approximately $3.3
million or 104.9% during the three months ended September 30, 2011 as compared to the three months
ended September 30, 2010. The increase was attributable to higher personnel costs of $2.3 million
(including a $0.3 million increase in stock-based compensation) as a result of the increase in our
headcount in research and development, including $0.3 million due to changes in the value of the
Swedish kronor as the vast majority of our research and development staff is based in Lund, Sweden,
and an increase in other expenses such as facilities and travel related to a larger research and
development function of $1.0 million.
General and Administrative. General and administrative expenses were $16.7 million for the
three months ended September 30, 2011 compared to $9.3 million for the three months ended September
30, 2010, an increase of $7.4 million, or 79.9%. This increase was due to other general and
administrative costs of $4.1 million, primarily due to an increase in professional fees, such as
legal and information technology consulting, as we expand our infrastructure to support anticipated
global growth. We had an increase in personnel costs of $2.9 million (including a $0.5 million
increase in stock-based compensation) to build out our corporate level functions to support
anticipated global growth and meet the demands and compliance responsibilities of a U.S. public
company. This increase was also due to an increase in facility and infrastructure costs of $0.4
million to support international expansion and a $0.3 million increase in public company costs,
such as accounting and legal fees and directors and officers insurance in the three months ended
September 30, 2011 as compared to the three months ended September 30, 2010. These increases were
offset by a decrease of $0.3 million in travel expenses primarily related to less travel during the
summer months.
Other Income (Expense), net. Other income was $0.8 million for the three months ended
September 30, 2011 compared to expense of $3.4 million for the three months ended September 30,
2010. During the three months ended September 30, 2011, we had foreign exchange gains of $0.7
million and net interest income of $0.1 million. During the three months ended September 30, 2010,
we had a foreign exchange loss and other expenses of $3.3 million and net interest expense of $0.1
million. Net interest expense decreased primarily due to the repayment in full of the principal,
accrued interest and prepayment penalty of our previously outstanding note payable balance in July
2010.
(Provision) Benefit for Income Taxes. The effective tax rate for the three months ended
September 30, 2011 was a provision of 21.7% compared to a provision of 108.6% in the prior-year
period. The effective tax rate for the three months ended September 30, 2010 reflects recognition
of certain valuation allowances, a provision to return adjustment and a true up of the estimated
annual effective tax rate during the period. Our provision for income taxes was based on our
estimated annual effective tax rate adjusted for the recognition of discrete items. Our estimated
annual effective tax rate principally includes the U.S. federal statutory rate, state income taxes
and the impact of foreign income taxed at different rates. We operate in an international
environment with significant operations in various locations outside the U.S. Accordingly, the
consolidated income tax rate is a composite rate reflecting our income (loss) and the applicable
tax rate in the various locations where we operate.
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Table of Contents
Comparison of the Nine Months Ended September 30, 2011 and 2010
Revenue
The following table sets forth revenue by source:
Nine Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Percentage of | Percentage of | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Period to Period Change | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
License revenue |
$ | 128,751 | 60.5 | % | $ | 88,905 | 61.3 | % | $ | 39,846 | 44.8 | % | ||||||||||||
Maintenance revenue |
64,148 | 30.2 | % | 41,560 | 28.6 | % | 22,588 | 54.4 | % | |||||||||||||||
Professional services revenue |
19,666 | 9.3 | % | 14,698 | 10.1 | % | 4,968 | 33.8 | % | |||||||||||||||
Total revenue |
$ | 212,565 | 100.0 | % | $ | 145,163 | 100.0 | % | $ | 67,402 | 46.4 | % | ||||||||||||
Revenue was $212.6 million for the nine months ended September 30, 2011 compared to
$145.2 million for the nine months ended September 30, 2010, an increase of $67.4 million, or
46.4%. All territories reported strong revenue growth, particularly the Americas (includes North
America and South America), the Nordic region (includes Sweden, Denmark, Finland and Norway), the
German region (includes Germany, Austria and Switzerland) and the United Kingdom, which grew by
59%, 32%, 38% and 35% and contributed an incremental $47.0 million in total revenue. License
revenue grew by approximately $39.8 million, or 44.8%. There was no material change in the pricing
for our product during the nine months ended September 30, 2011. Revenue growth was achieved
primarily due to volume growth as more customers acquired our product for the first time, along
with additional license purchases by our existing customers. In addition, we closed 291 contracts
that had total license and first years maintenance exceeding $100,000, compared to 190 contracts
for the same period last year. Amounts invoiced to existing customers during the nine months ended
September 30, 2011 as compared to the nine months ended September 30, 2010 represented a larger
share of total billings, approximately 67%, resulting from our land and expand sales strategy.
Billings from our indirect partner channel for license and first year maintenance were 52% of total
license and first year maintenance billings for the nine months ended September 30, 2011.
Maintenance revenues grew by approximately 54.4% in the nine months ended September 30, 2011 as
compared to the nine months ended September 30, 2010 driven by annual maintenance renewal rates of
greater than 85%. Professional services revenue grew by 33.8% in the nine months ended September
30, 2011 compared to the nine months ended September 30, 2010 due to growth in consulting and
training revenue, resulting from an increase in our customer base. The revenue growth in the nine
months ended September 30, 2011 as compared to the nine months ended September 30, 2010 may not be
indicative of our future revenue growth, if any.
18
Table of Contents
Cost of Revenue and Gross Profit
The following table sets forth cost of revenue and gross profit for each revenue source:
Nine Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Percentage of | Percentage of | |||||||||||||||||||||||
Related | Related | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Period to Period Change | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Cost of Revenue: |
||||||||||||||||||||||||
Cost of license revenue |
$ | 2,610 | 2.0 | % | $ | 2,568 | 2.9 | % | $ | 42 | 1.6 | % | ||||||||||||
Cost of maintenance revenue |
4,916 | 7.7 | % | 2,673 | 6.4 | % | 2,243 | 83.9 | % | |||||||||||||||
Cost of professional services revenue |
17,188 | 87.4 | % | 10,924 | 74.3 | % | 6,264 | 57.3 | % | |||||||||||||||
Total cost of revenue |
$ | 24,714 | 11.6 | % | $ | 16,165 | 11.1 | % | $ | 8,549 | 52.9 | % | ||||||||||||
Gross Profit: |
||||||||||||||||||||||||
License revenue |
$ | 126,141 | 98.0 | % | $ | 86,337 | 97.1 | % | $ | 39,804 | 46.1 | % | ||||||||||||
Maintenance revenue |
59,232 | 92.3 | % | 38,887 | 93.6 | % | 20,345 | 52.3 | % | |||||||||||||||
Professional services revenue |
2,478 | 12.6 | % | 3,774 | 25.7 | % | (1,296 | ) | -34.3 | % | ||||||||||||||
Total gross profit |
$ | 187,851 | 88.4 | % | $ | 128,998 | 88.9 | % | $ | 58,853 | 45.6 | % | ||||||||||||
Cost of revenue was $24.7 million for the nine months ended September 30, 2011 compared
to $16.2 million for the nine months ended September 30, 2010, an increase of $8.5 million, or
52.9%. Cost of license revenue largely consists of referral fees paid to third parties in
connection with software license sales. Referral fees decreased $0.1 million for the nine months
ended September 30, 2011 as compared to the nine months ended September 30, 2010. Cost of
maintenance revenue increased $2.2 million for the nine months ended September 30, 2011 as compared
to same period in 2010. In anticipation of continued growth in our current customer base, we
increased headcount in our support organization which increased personnel costs by $1.9 million
(including a $0.1 million increase in stock-based compensation) for the nine months ended September
30, 2011 as compared to the same period in 2010. In addition, other cost of maintenance revenue
increased $0.3 million for the nine months ended September 30, 2011 as compared to the same period
in 2010. Cost of professional services revenue increased by $6.3 million in the nine months ended
September 30, 2011 as compared to the nine months ended September 30, 2010 largely due to increased
personnel costs of $1.6 million (including a $0.3 million increase in stock-based compensation),
increased consulting and other cost of professional services of $4.1 million, increased travel
expenses of $0.4 million and increased facility and infrastructure costs of $0.2 million to support
international expansion. The decrease in our gross margin during the nine months ended September
30, 2011 as compared to the nine months ended September 30, 2010 may not be indicative of our
future gross margin.
Operating Expenses
The following table sets forth operating expenses as a percentage of revenue:
Nine Months Ended September 30, | ||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Percentage of | Percentage of | |||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | Period to Period Change | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Sales and marketing |
$ | 124,917 | 58.8 | % | $ | 81,710 | 56.3 | % | $ | 43,207 | 52.9 | % | ||||||||||||
Research and development |
18,270 | 8.6 | % | 8,781 | 6.0 | % | 9,489 | 108.1 | % | |||||||||||||||
General and administrative |
51,217 | 24.1 | % | 27,495 | 18.9 | % | 23,722 | 86.3 | % | |||||||||||||||
Total operating expenses |
$ | 194,404 | 91.5 | % | $ | 117,986 | 81.3 | % | $ | 76,418 | 64.8 | % | ||||||||||||
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Table of Contents
Sales and Marketing. Sales and marketing expenses increased $43.2 million, or 52.9% in
the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010
reflecting increased personnel costs related to higher employee headcount and variable compensation
resulting from increased license revenue. The increase in sales and marketing expenses was
primarily attributable to an increase in personnel and commission costs of $29.5 million (including
a $2.4 million increase in stock-based compensation) for the nine months ended September 30, 2011
as compared to the nine months ended September 30, 2010. We had an increase in marketing costs of
$5.3 million during the nine months ended September 30, 2011 as compared to the nine months ended
September 30, 2010. This increase in marketing costs included $1.0 million for our annual partner
event, Qonnections. In addition, we had an increase in travel expenses of $3.7 million, an increase
in consulting and other sales and marketing costs of $3.0 million and an increase in facility and
infrastructure costs of $1.7 million to support international expansion. The total increase in
sales and marketing expense includes $3.5 million from two newly formed inside sales teams. During
the second half of 2010, we formed our North American inside sales team, which represented
incremental costs of $2.2 million during the nine months ended September 30, 2011 as compared to
the nine months ended September 30, 2010. During the first half of 2011, we formed our European
inside sales team, which represented incremental costs of $1.3 million during the nine months ended
September 30, 2011 as compared to the nine months ended September 30, 2010.
Research and Development. Research and development expenses grew by approximately $9.5
million or 108.1% during the nine months ended September 30, 2011 as compared to the nine months
ended September 30, 2010. The increase was attributable to higher personnel costs of $6.3 million (including a $0.4 million increase in stock-based compensation) as a result of
the increase in our headcount in research and development, including $1.0 million due to changes in
the value of the Swedish kronor as the vast majority of our research and development staff is based
in Lund, Sweden, and an increase in other expenses such as facilities and travel related to a
larger research and development function of $3.2 million.
General and Administrative. General and administrative expenses were $51.2 million for the
nine months ended September 30, 2011 compared to $27.5 million for the nine months ended September
30, 2010, an increase of $23.7 million, or 86.3%. We had an increase in other general and
administrative costs of $9.7 million, primarily due to an increase in professional fees, such as
legal and information technology consulting, as we expanded our infrastructure to support
anticipated global growth. We had an increase in personnel costs of $7.1 million (including a $1.3
million increase in stock-based compensation) to build out our corporate level functions to support
anticipated global growth and meet the demands and compliance responsibilities of a U.S. public
company. In addition, in the nine months ended September 30, 2011, we had $2.2 million in lease
termination costs relating to our previous facility in Lund, Sweden, an increase in public company
costs, such as accounting and legal fees and directors and officers insurance, of $2.1 million, an
increase in travel expenses of $1.4 million primarily related to our annual employee summit and an
increase in other facility and infrastructure costs of $1.2 million to support our international
expansion.
Other Expense, net. Other expense was $0.2 million for the nine months ended September 30,
2011 compared to other expense of $6.5 million for the nine months ended September 30, 2010. During
the nine months ended September 30, 2011, we had foreign exchange losses and other expenses of $0.4
million offset by net interest income of $0.2 million. During the nine months ended September 30,
2010, we had a foreign exchange loss and other expenses of $3.9 million, expense due to the change
in the fair value of stock warrants of $2.0 million and net interest expense of $0.6 million. The
change in the fair value of stock warrants decreased due to the reclassification of the warrant
liability to additional paid-in-capital upon the effectiveness of our IPO in July 2010. Net
interest expense decreased primarily due to the repayment in full of the principal, accrued
interest and prepayment penalty of our previously outstanding note payable balance in July 2010.
(Provision) Benefit for Income Taxes. The effective tax rate for the nine months ended
September 30, 2011 was a benefit of 33.9% compared to a provision of 35.4% in the prior-year
period. Our (provision) benefit for income taxes was based on our estimated annual effective tax
rate adjusted for the recognition of discrete items. Our estimated annual effective tax rate
principally includes the U.S. federal statutory rate, state income taxes and the impact of foreign
income taxed at different rates. We operate in an international environment with significant
operations in various locations outside the U.S. Accordingly, the consolidated income tax rate is a
composite rate reflecting our income (loss) and the applicable tax rate in the various locations
where we operate.
Seasonality
Our quarterly results reflect seasonality in the sale of our products and services.
Historically, a pattern of increased license sales in the fourth quarter has positively impacted
sales activity in that period which can make it difficult to achieve sequential revenue growth in
the first quarter. In addition, our European operations occasionally provide lower revenues in the
summer months because of the generally reduced level of economic activity in Europe during those
months. Similarly, our gross margins and operating income have been affected by these historical
trends because the majority of our expenses are relatively fixed in the near-term. The timing of
revenues in relation to our expenses, much of which does not vary directly with revenue, has an
impact on the cost of revenue, sales and marketing expense, research and development expense, and
general and administrative expense as a percentage of revenue in each calendar quarter during the
year. The majority of our expenses are personnel-related and include salaries, stock-based
compensation, benefits, and incentive-based compensation plan expenses. As a result, we have not
experienced significant seasonal fluctuations in the timing of expenses from period to period,
other than an increase in general and administrative expenses during the first quarter of each year
as a result of our annual employee summit and an increase in sales and marketing expenses in the
second quarter of each year due to our annual partner event. On a quarterly basis, we have usually
generated the majority of our revenues in the final month of each quarter and a significant amount
in the last two weeks of a quarter. We believe this is due to customer buying patterns typical in
this industry. Although these seasonal factors are common in the technology sector, historical
patterns should not be considered a reliable indicator of our future sales activity or performance.
20
Table of Contents
Liquidity and Capital Resources
Since our inception, we have financed our operations through the sale of preferred stock and
common stock, cash flows generated by operations and borrowings under debt instruments. As of
September 30, 2011, we had cash and cash equivalents totaling $170.1 million, net accounts
receivable of $72.3 million and $155.3 million of working capital. As of September 30, 2011, we had
$47.7 million of our total cash and cash equivalents in banking institutions outside of the U.S.
We believe that our existing cash and cash equivalents and our cash flow from operations will
be sufficient to fund our operations and our capital expenditures for at least the next 12 months.
Our future capital requirements will depend on many factors, including our rate of revenue growth,
the expansion of our sales and marketing activities, the timing and extent of spending to support
product development efforts and expansion into new territories, the timing of introductions of new
software products and enhancements to existing software products and the continuing market
acceptance of our software offerings. We may from time to time enter into agreements, arrangements
or letters of intent regarding potential investments in, or acquisitions of, complementary
businesses, applications or technologies. If we enter into these types of arrangements, it could
require us to seek additional equity or debt financing. Additional funds may not be available on
terms favorable to us or at all.
Since July 2010, we have been incurring costs as a public company that we had not previously
incurred, including, but not limited to, costs and expenses for directors fees, increased
directors and officers insurance, investor relations fees, expenses for compliance with the
Sarbanes-Oxley Act of 2002 and rules implemented by the SEC and Nasdaq, the exchange on which our
common stock is listed, and various other costs. The Sarbanes-Oxley Act of 2002 requires annual
management assessment of the effectiveness of our internal control over financial reporting.
The following table shows selected balance sheet data as well as our cash flows from operating
activities, investing activities, and financing activities for the stated periods:
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
(dollars in thousands) | ||||||||
Cash and cash equivalents |
$ | 170,117 | $ | 158,712 | ||||
Accounts receivable, net |
72,259 | 85,364 | ||||||
Deferred revenue |
52,620 | 50,024 | ||||||
Working capital |
155,268 | 149,069 |
Nine Months Ended September 30, | ||||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
(dollars in thousands) | ||||||||
Cash flow activities |
||||||||
Net cash provided by operating activities |
$ | 10,994 | $ | 23,170 | ||||
Net cash used in investing activities |
(6,652 | ) | (1,612 | ) | ||||
Net cash provided by financing activities |
7,423 | 108,919 |
Cash and Cash Equivalents
Our cash and cash equivalents at September 30, 2011 were held for working capital purposes and
were invested primarily in bank deposits and money market accounts having less than 90 day
maturities. We do not enter into investments for trading or speculative purposes. These balances
could be impacted if the underlying depository institutions or the guarantors fail or could be
subject to adverse conditions in the financial markets. We can provide no assurances that access to
our funds will not be impacted by adverse conditions in the financial markets.
Accounts Receivable, net
Our accounts receivable balance fluctuates from period to period which affects our cash flow
from operating activities. The fluctuations vary depending on the timing of our service delivery
and billing activity, cash collections and changes to our allowance for doubtful accounts. Our
allowance for doubtful accounts represents our best estimate of the amount of probable credit
losses. To date, we have not incurred any significant write-offs of accounts receivable; however,
this may not be indicative of future accounts receivable write-offs.
Cash Flows
Operating Activities
Net cash provided by operating activities was $11.0 million for the nine months ended
September 30, 2011. We incurred non-cash expenses totaling $7.9 million for the nine months ended
September 30, 2011. Non-cash expenses primarily consisted of stock-based compensation expense,
provisions for bad debt, unrealized foreign currency gains and losses, and depreciation and
amortization expense.
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The change in certain assets and liabilities resulted in a net source of cash of $7.6 million
for the nine months ended September 30, 2011. Net cash provided by operating activities is driven
by sales of our products. Collection of accounts receivable from the product sales is a significant
component of our cash flows from operating activities, as is the change in deferred revenue related
to these sales. In addition, net cash provided by operating activities reflects income tax payments
made of $13.0 million.
Net cash provided by operating activities was $23.2 million for the nine months ended
September 30, 2010. We incurred non-cash expenses totaling $7.6 million for the nine months ended
September 30, 2010. Non-cash expenses primarily consisted of stock-based compensation expense,
provisions for bad debt, change in the fair value of warrants, unrealized foreign currency gains
and losses, and depreciation and amortization expense.
The change in certain assets and liabilities resulted in a net source of cash of $12.7 million
for the nine months ended September 30, 2010. Net cash provided by operating activities is driven
by sales of our software offerings. Collection of accounts receivable from the sales of our software offerings is a significant component of our cash flows from operating activities, as
is the change in deferred revenue related to these sales. In addition, net cash provided by
operating activities includes income tax payments made of $1.0 million.
Investing Activities
Net cash used in investing activities was $6.7 million for the nine months ended September 30,
2011. Cash used in investing activities for the nine months ended September 30, 2011 was primarily
for capital expenditures of $6.5 million related to leasehold improvements and computer equipment
as we continued to expand our infrastructure and workforce. In addition, we paid out $0.2 million
for the achievement of certain financial targets related to the acquisition of Syllogic Corporation
in January 2010.
Net cash used in investing activities was $1.6 million for the nine months ended September 30,
2010. Cash used in investing activities for the nine months ended September 30, 2010 was primarily
for capital expenditures of $1.8 million related to property and equipment as we expanded our
infrastructure and workforce. These capital expenditures were offset by the acquisition of Syllogic
Corporation in January 2010, which resulted in a source of cash of approximately $0.2 million.
Financing Activities
Net cash provided by financing activities was $7.4 million for the nine months ended September
30, 2011. Net cash provided by financing activities resulted from the proceeds from the exercise of
common stock options of $7.2 million and borrowings under our subsidiarys line of credit of $0.2
million during such period.
Net cash provided by financing activities was $108.9 million for the nine months ended
September 30, 2010. Net cash provided by financing activities for the nine months ended September
30, 2010 primarily resulting from net proceeds of our IPO of $115.1 million, proceeds from the
exercise of common stock options of $1.0 million, an excess tax benefit from stock-based
compensation of $0.3 million and proceeds from the issuance of common stock options of $0.1
million. These proceeds were offset by payments under our then outstanding long-term note payable
of $7.4 million and payments on our then outstanding line of credit of $0.2 million.
Non-GAAP Financial Measures
We use measures of non-generally accepted accounting principles (Non-GAAP) income (loss)
from operations, Non-GAAP net income (loss) and Non-GAAP income (loss) per share. We believe that
the Non-GAAP financial information provided can assist investors in understanding and assessing our
on-going core operations and prospects for the future. This Non-GAAP financial information provides
an additional tool for investors to use in comparing our financial results with other companies in
our industry, many of which present similar Non-GAAP financial measures to investors.
For the three and nine months ended September 30, 2011 and 2010, Non-GAAP operating income is
determined by taking income from operations and adding back non-cash stock-based compensation
expense, employer payroll taxes related to stock transactions and lease termination costs. Non-GAAP
net income is determined by taking pre-tax income and adding back non-cash stock-based compensation
expense and employer payroll taxes on stock transactions, and the result is tax affected at an
estimated 32% tax rate.
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The following is a reconciliation of Non-GAAP income from operations, Non-GAAP net income and
Non-GAAP income per share to the most comparable U.S. GAAP measure for the periods indicated:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
(dollars in thousands) | (dollars in thousands) | |||||||||||||||
Reconciliation of Non-GAAP income from operations: |
||||||||||||||||
GAAP income (loss) from operations |
$ | 2,057 | $ | 3,162 | $ | (6,553 | ) | $ | 11,012 | |||||||
Stock-based compensation expense |
2,859 | 868 | 6,359 | 1,917 | ||||||||||||
Employer payroll taxes on stock transactions |
314 | | 2,114 | | ||||||||||||
Lease termination costs |
| | 2,236 | | ||||||||||||
Non-GAAP income from operations (1) |
$ | 5,230 | $ | 4,030 | $ | 4,156 | $ | 12,929 | ||||||||
Reconciliation of Non-GAAP net income: |
||||||||||||||||
GAAP net income (loss) |
$ | 2,275 | $ | (511 | ) | $ | (4,468 | ) | $ | 2,908 | ||||||
Stock-based compensation expense |
2,859 | 868 | 6,359 | 1,917 | ||||||||||||
Employer payroll taxes on stock transactions |
314 | | 2,114 | | ||||||||||||
Lease termination costs |
| | 2,236 | | ||||||||||||
Income tax adjustment (2) |
(1,316 | ) | 67 | (3,555 | ) | (459 | ) | |||||||||
Non-GAAP net income |
$ | 4,132 | $ | 424 | $ | 2,686 | $ | 4,366 | ||||||||
Reconciliation of Non-GAAP income per share: |
||||||||||||||||
Non-GAAP net income per common share basic |
$ | 0.05 | $ | 0.01 | $ | 0.03 | $ | 0.06 | ||||||||
Non-GAAP net income per common share diluted |
$ | 0.05 | $ | 0.00 | $ | 0.03 | $ | 0.05 | ||||||||
GAAP net income (loss) per common share basic |
$ | 0.03 | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.01 | ||||||
GAAP net income (loss) per common share diluted |
$ | 0.03 | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.01 | ||||||
Non-GAAP weighted average number of common shares outstanding basic (3) |
83,171,163 | 77,144,778 | 81,391,156 | 76,807,793 | ||||||||||||
Non-GAAP weighted average number of common shares outstanding diluted (3) |
87,634,196 | 85,582,411 | 85,826,880 | 84,018,462 | ||||||||||||
GAAP weighted average number of common shares outstanding basic |
83,171,163 | 68,074,996 | 81,391,156 | 34,235,347 | ||||||||||||
GAAP weighted average number of common shares outstanding diluted |
87,634,196 | 68,074,996 | 81,391,156 | 41,446,016 | ||||||||||||
(1) | In 2010, we excluded severance expense for Non-GAAP reporting purposes. Beginning in
the first quarter of 2011, we began to include severance expense in our Non-GAAP results.
Accordingly, the Non-GAAP results for the three and nine months ended September 30, 2010
have been revised to include severance expense in order to provide the period-to-period
comparison. Severance expense was $0.4 million for the three and nine months ended
September 30, 2010. |
|
(2) | Income tax adjustment is used to adjust the U.S. GAAP benefit for income taxes to a
Non-GAAP (provision) benefit for income taxes utilizing an estimated tax rate of 32%. In
2010, we adjusted our U.S. GAAP (provision) benefit for income taxes utilizing an
estimated long-term effective tax rate of 28%. For 2011, we have revised our estimated
long-term effective tax rate to 32%. Accordingly, the Non-GAAP results for the three and
nine months September 30, 2010 have been revised to utilize an estimated long-term
effective tax rate of 32% in order to provide the period-to-period comparison. |
|
(3) | For 2010, the basic and diluted Non-GAAP weighted average number of common shares
outstanding reflects the automatic conversion of the then outstanding shares of
convertible preferred stock into 46,721,424 shares of common stock and the issuance of
12,880,000 shares of common stock as though the completion of the IPO had occurred at the
beginning of the period, which results in us not applying the two-class method of earnings
per share as required under U.S. GAAP. |
Contractual Obligations and Commitments and Off-Balance Sheet Arrangements
There have been no material changes to our contractual obligations from the information
provided in Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operations, included in our Annual Report on Form 10-K for the fiscal year ended December 31,
2010.
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In December 2010, we entered into a transfer agreement (the Transfer Agreement) with Sony
Ericsson Mobile Communications AB (SEMC) relating to the transfer by SEMC to us of certain rental
lease agreements for approximately 11,253 square meters of office space and designated parking
spaces located in the Ideon Science Park in Lund, Sweden (the Property). Pursuant to the Transfer
Agreement, effective as of January 1, 2011 we assumed the rights and obligations of SEMC under two
separate lease agreements, as amended and/or supplemented (the Lease Agreements), whereby SEMC
leased the Property from Fastighets AB Remulus Lund 3 (the Property Owner). We believe the
Property will serve as our primary research and development center. The Lease Agreements were set
to expire on October 31, 2013 and October 31, 2016, respectively. Each Lease Agreement provided for
automatic renewal upon expiration for additional three year terms unless written notice was
provided by us to the Property Owner of our desire to not renew the applicable lease at least 12
months prior to the end of the respective term. The Lease Agreements provided for the payment of
annual base rent in the amount of 21.6 million Swedish kronor (approximately $3.2 million based on
an assumed exchange rate of approximately 0.15 as of September 30, 2011), subject to annual
increases. In addition to the base rent, we were required to pay to the Property Owner certain
operating expenses and other fees in accordance with the terms of the Lease Agreements. The Lease
Agreements also contained customary representations and covenants regarding occupancy, maintenance
and care of the Property.
In consideration for our assumption of SEMCs obligations under the Lease Agreements, SEMC
paid us 26.0 million Swedish kronor (approximately $4.1 million based on an exchange rate of
approximately 0.16 at the time of payment), exclusive of value added tax, which was offset by 7.3
million Swedish kronor (approximately $1.2 million based on an exchange rate of approximately 0.16
at the time of payment), exclusive of value added tax, which we paid SEMC for certain personal
property, furniture and fixtures located at the Property. The net amount of 18.7 million Swedish
kronor (approximately $2.9 million based on an exchange rate of approximately 0.16 at the time of
payment) was received from SEMC in July 2011.
In May 2011, we began to occupy the Property in Lund, Sweden, and simultaneously ceased use of
our previous leased facility in Lund. In July 2011, we reached an agreement with the landlord of
the previous leased facility to allow us to terminate the lease agreement in exchange for a lease
termination fee of 9.5 million Swedish kronor. In October 2011, we paid the lease termination fee
of 9.5 million Swedish kronor (approximately $1.4 million based on an exchange rate of
approximately 0.15 as of September 30, 2011). In addition to the lease termination fee, we incurred $0.4 million in rent charges following our abandonment of the
previous leased facility as well as an impairment charge of $0.3 million related to the write-off
of leasehold improvements from the previous leased facility. These items resulted in aggregate
lease termination costs of $2.2 million and are recorded in general and administrative expenses in
the accompanying unaudited consolidated statement of operations for the nine months ended September
30, 2011.
On June 23, 2011, we entered into two new lease agreements with the Property Owner (the New
Lease Agreements) for the Property which supersede and replace in their entirety the Lease
Agreements. Both New Lease Agreements expire on April 30, 2019. Each New Lease Agreement will
automatically renew upon expiration for additional three year terms unless either party provides
written notice to the other of such partys desire to not renew the applicable lease at least 12
months prior to the end of the respective term. The New Lease Agreements provide for the payment
of annual base rent in the amount of approximately 20.8 million Swedish kronor (approximately $3.1
million based on an assumed exchange rate of approximately 0.15 as of September 30, 2011), subject
to annual increases. In addition to the base rent, we are required to pay the Property Owner
certain operating expenses and other fees in accordance with the terms of the New Lease Agreements.
The New Lease Agreements contain customary representations and covenants regarding occupancy,
maintenance and care of the Property.
We had no off-balance sheet arrangements, as defined in Item 303(a)(4) of the Securities and
Exchange Commissions Regulation S-K, as of September 30, 2011 and 2010.
Inflation
Normally, inflation does not have a significant impact on our operations as our products are
not generally sold on long-term contracts. Consequently, we can adjust our selling prices, to the
extent permitted by competition, to reflect cost increases caused by inflation.
Recent Accounting Pronouncements
See Note 2 to the unaudited consolidated financial statements in Part I, Item 1 of this
Quarterly Report on Form 10-Q.
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Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Market risk represents the risk of loss that may impact our financial position due to adverse
changes in financial market prices and rates. Our market risk exposure is primarily a result of
fluctuations in interest rates. We do not hold financial instruments for trading purposes.
Market Risk
We are exposed to certain financial risks, including fluctuations in foreign currency exchange
rates and interest rates. We manage our exposure to these market risks through internally
established policies and procedures and, when deemed appropriate, through the use of derivative
financial instruments. Our policies do not allow speculation in derivative instruments for profit
or execution of derivative instrument contracts for which there are no underlying exposures. We do
not use financial instruments for trading purposes and we are not a party to any leveraged
derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe that
we can modify or adapt our hedging strategies as needed.
Interest Rate Sensitivity
We had cash and cash equivalents of $170.1 million at September 30, 2011 and $158.7 million at
December 31, 2010. We held these amounts primarily in cash or money market funds.
We hold cash and cash equivalents for working capital purposes. We do not have material
exposure to market risk with respect to investments, as our investments consist primarily of highly
liquid investments purchased with original maturities of three months or less. We do not use
derivative financial instruments for speculative or trading purposes; however, we may adopt
specific hedging strategies in the future. Any declines in interest rates, however, will reduce
future interest income.
Foreign Exchange Risk
We market our products in the Americas, Europe, the Asia-Pacific Regions, and Africa and
develop our products in Europe. As a result of our business activities in foreign countries, our
financial results are affected by factors such as changes in foreign currency exchange rates or
economic conditions in foreign markets, and there is no assurance that exchange rate fluctuations
will not harm our business in the future. We sell our products in certain countries in the local
currency of the respective country. In addition, our product development activities are principally
based at our facility in Lund, Sweden. This provides some natural hedging because most of our
subsidiaries operating expenses are denominated in their local currencies. Regardless of this
natural hedging, our results of operations may be adversely impacted by the exchange rate
fluctuation. Although we will continue to monitor our exposure to currency fluctuations and, where
appropriate, may use financial hedging techniques in the future to minimize the effect of these
fluctuations, we are not currently engaged in any financial hedging transactions.
Foreign exchange risk exposures arise from transactions denominated in a currency other than
our functional currency and from foreign denominated revenue and profit translated into U.S.
dollars. Approximately 68% and 70% of our operating revenues were denominated in currencies other
than the U.S. dollar for the nine months ended September 30, 2011 and 2010. The principal foreign
currencies in which we conduct business are the Swedish kronor, the British pound and the euro. The
translation of currencies in which we operate into the U.S. dollar may affect consolidated revenues
and gross profit margins as expressed in U.S. dollars. A weakening of the U.S. dollar versus other
currencies in which we operate may increase our consolidated revenues and operating expenses while
the strengthening of the U.S. dollars versus these currencies may have an opposite effect on our
consolidated results expressed in U.S. dollars.
Item 4. | Controls and Procedures |
Evaluation of Disclosure and Control Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30,
2011. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d and
15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and
other procedures of a company that are designed to ensure that information required to be disclosed
by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures designed to ensure
that information require to be disclosed by a company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the companys management, including its
principal executive and principal financial officers, as appropriated to allow timely decisions
regarding required disclosure. Management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
Our management, with the participation of the Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures as of
the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of
September 30, 2011, our disclosure controls and procedures were effective at the reasonable
assurance level.
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Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rule 13a-15(f) and
15d-(f) under the Exchange Act) occurred during the quarter ended September 30, 2011 that has
materially affected, or is reasonably likely to materially affect, our internal controls over
financial reporting.
PART II OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
We are party to legal proceedings in the ordinary course of business and we may from time to time become subject
to additional proceedings or additional claims or remedies sought in current proceedings. These actions typically seek,
among other things, breach of contract or employment-related damages, intellectual property claims or damages, punitive
damages, civil penalties or other losses or declaratory relief. Although there can be no assurance as to the outcome of
any such proceedings, we do not believe any of the proceedings currently pending, if determined adversely to us, would
individually or in the aggregate have a material adverse effect on our business, operating results or financial
condition.
Our intellectual property is an essential element of our business. We own registered
trademarks for the Qlik and QlikView name. We rely on a combination of copyright, trademark,
trade dress and trade secrecy laws, as well as confidentiality procedures and contractual
restrictions, to establish and protect our proprietary rights both domestically and abroad. These
laws, procedures and restrictions provide only limited protection. As of September 30, 2011, we had
three issued U.S. patents and had a pending U.S. patent. In addition, we had 19 issued and six
pending foreign patents. Any future patents issued to us may be challenged, invalidated or
circumvented. Any patents that might be issued in the future, with respect to pending or future
patent applications may not provide sufficiently broad protection or may not prove to be
enforceable in actions against alleged infringers. We endeavor to enter into agreements with our
employees and contractors and with parties with whom we do business in order to limit access to and
disclosure of our proprietary information.
ITEM 1A. | RISK FACTORS |
In our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed with the
SEC on March 16, 2011, we identify under Part I, Item 1A important factors which could affect our
business, financial condition, results of operations and future operations and could cause our
actual results for future periods to differ materially from our anticipated results or other
expectations, including those expressed in any forward-looking statements made in this Quarterly
Report on Form 10-Q. There have been no material changes to the risk factors subsequent to the
filing of our Annual Report on Form 10-K for the year ended December 31, 2010. However, the risks
described in our Form 10-K are not the only risks we face. Additional risks and uncertainties that
we currently deem to be immaterial or not currently known to us, as well as other risks reported
from time to time in our reports to the SEC, also could cause our actual results to differ
materially from our anticipated results or other expectations.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Recent Sales of Unregistered Securities
None.
Use of Proceeds
In July 2010, we completed the initial public offering of shares of our common stock, in which
12,880,000 shares of common stock were sold at a price to the public of $10.00 per share for an
aggregate offering price of $128.8 million. The offer and sale of all of the shares in the IPO were
registered under the Securities Act pursuant to a registration statement on Form S-1 (File No.
333-165844), which was declared effective by the SEC on July 15, 2010. The offering commenced as of
July 15, 2010 and did not terminate before all of the securities registered in the registration
statement were sold. The syndicate of underwriters was led by Morgan Stanley & Co. Incorporated,
Citigroup Global Markets Inc., and J.P. Morgan Securities Inc. as joint book-running managers for
the offering, Jefferies & Company, Inc. and Stifel Nicolaus Weisel served as co-managers for the
offering. Our portion of the net proceeds from the initial public offering was approximately $115.1
million after deducting underwriting discounts of $9.0 million and offering costs of $4.7 million.
We used approximately $5.4 million of the net proceeds from the offering to repay in full the
principal and accrued interest and prepayment fee on our prior debt facility. We intend to use the
balance of the net proceeds from the offering for working capital and other general corporate
purposes, including financing our growth, developing new products and funding capital expenditures.
Pending such usage, we have invested the net proceeds primarily in short-term, interest-bearing
money market accounts.
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ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | REMOVED AND RESERVED |
ITEM 5. | OTHER INFORMATION |
None.
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ITEM 6. | EXHIBITS |
The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
Exhibit | ||||
Number | Description of Document | |||
31.1 | Certification of Chief Executive Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 |
|||
31.2 | Certification of Chief Financial Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 |
|||
32.1 | Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
101 | Interactive Data File (Quarterly Report on Form 10-Q, for the
quarterly period ended September 30, 2011, furnished in XBRL
(eXtensible Business Reporting Language)). |
* | The certification attached as Exhibit 32.1 is not deemed filed with the SEC and is not to be
incorporated by reference into any filing of the registrant under the Securities Act of 1933 or the
Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of
any general incorporation language contained in such filing, except to the extent that the
registrant specifically incorporates it by reference. |
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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, on
November 3, 2011.
QLIK TECHNOLOGIES INC. |
||||
By: | /s/ LARS BJÖRK | |||
Lars Björk | ||||
President, Chief Executive Officer, and Director (Principal Executive Officer) |
||||
/s/ WILLIAM G. SORENSON | ||||
William G. Sorenson | ||||
Chief Financial Officer, Treasurer, and Secretary (Principal Financial Officer and Principal Accounting Officer) |
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EXHIBIT INDEX
Exhibit | ||||
Number | Description of Document | |||
31.1 | Certification of Chief Executive Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 |
|||
31.2 | Certification of Chief Financial Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 |
|||
32.1 | Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
101 | Interactive Data File (Quarterly Report on Form 10-Q, for the
quarterly period ended September 30, 2011, furnished in XBRL
(eXtensible Business Reporting Language)). |
* | The certification attached as Exhibit 32.1 is not deemed filed with the SEC and is not to be
incorporated by reference into any filing of the registrant under the Securities Act of 1933 or the
Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of
any general incorporation language contained in such filing, except to the extent that the
registrant specifically incorporates it by reference. |
30