SYNACOR, INC., 10-Q filed on 11/14/2014
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2014
Nov. 6, 2014
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
Synacor, Inc. 
 
Entity Central Index Key
0001408278 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2014 
 
Amendment Flag
false 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q3 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Non-accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
27,380,870 
Condensed Consolidated Balance Sheets—Unaudited (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
CURRENT ASSETS:
 
 
Cash and cash equivalents
$ 24,359 
$ 36,397 
Accounts receivable—net of allowance of $76 and $328
16,908 
14,569 
Prepaid expenses and other current assets
1,790 
1,691 
Deferred income taxes
1,150 
314 
Total current assets
44,207 
52,971 
PROPERTY AND EQUIPMENT—Net
15,536 
14,085 
DEFERRED INCOME TAXES, NON-CURRENT
6,255 
4,455 
OTHER LONG-TERM ASSETS
127 
348 
GOODWILL
1,565 
1,565 
CONVERTIBLE PROMISSORY NOTE
1,000 
1,000 
INVESTMENT IN EQUITY INTEREST
141 
365 
TOTAL ASSETS
68,831 
74,789 
CURRENT LIABILITIES:
 
 
Accounts payable
10,794 
13,573 
Accrued expenses and other current liabilities
7,050 
5,177 
Current portion of capital lease obligations
1,276 
1,946 
Total current liabilities
19,120 
20,696 
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS
1,344 
885 
OTHER LONG-TERM LIABILITIES
366 
977 
Total liabilities
20,830 
22,558 
COMMITMENTS AND CONTINGENCIES
   
   
STOCKHOLDERS’ EQUITY:
 
 
Preferred stock, $0.01 par value—10,000,000 shares authorized, no shares issued and outstanding at December 31, 2013 and September 30, 2014
Common stock, $0.01 par value—100,000,000 shares authorized, 27,684,598 issued and 27,365,098 outstanding at December 31, 2013, and 100,000,000 authorized, 27,931,603 issued and 27,379,450 shares outstanding at September 30, 2014
279 
277 
Treasury stock—at cost, 319,500 shares at December 31, 2013 and 552,153 shares at September 30, 2014
(1,141)
(569)
Additional paid-in capital
105,075 
102,226 
Accumulated deficit
(56,220)
(49,705)
Accumulated other comprehensive income
Total stockholders’ equity
48,001 
52,231 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 68,831 
$ 74,789 
Condensed Consolidated Balance Sheets—Unaudited (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 328 
$ 76 
Preferred stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized
100,000,000 
100,000,000 
Common stock, shares issued
27,931,603 
27,684,598 
Common stock, shares outstanding
27,379,450 
27,365,098 
Treasury stock, shares
552,153 
319,500 
Condensed Consolidated Statements of Operations—Unaudited (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Income Statement [Abstract]
 
 
 
 
REVENUE
$ 26,231 
$ 26,551 
$ 75,670 
$ 82,402 
COSTS AND OPERATING EXPENSES:
 
 
 
 
Cost of revenue (exclusive of depreciation shown separately below)
14,386 
14,083 
41,404 
43,864 
Research and development (exclusive of depreciation shown separately below)
7,577 
7,404 
22,188 
21,548 
Sales and marketing
2,601 
2,058 
7,194 
6,332 
General and administrative (exclusive of depreciation shown separately below)
4,090 
2,805 
10,689 
8,772 
Depreciation
1,133 
1,119 
3,308 
3,387 
Gain on sale of domain
(1,000)
Total costs and operating expenses
29,787 
27,469 
83,783 
83,903 
LOSS FROM OPERATIONS
(3,556)
(918)
(8,113)
(1,501)
OTHER EXPENSE
(14)
(15)
(30)
INTEREST EXPENSE
(75)
(39)
(186)
(140)
LOSS BEFORE INCOME TAXES AND EQUITY INTEREST
(3,645)
(972)
(8,299)
(1,671)
BENEFIT FOR INCOME TAXES
(1,288)
(260)
(2,613)
(446)
LOSS IN EQUITY INTEREST
(239)
(120)
(829)
(314)
NET LOSS
$ (2,596)
$ (832)
$ (6,515)
$ (1,539)
NET LOSS PER SHARE:
 
 
 
 
Basic (in dollars per share)
$ (0.09)
$ (0.03)
$ (0.24)
$ (0.06)
Diluted (in dollars per share)
$ (0.09)
$ (0.03)
$ (0.24)
$ (0.06)
WEIGHTED AVERAGE SHARES USED TO COMPUTE NET LOSS PER SHARE:
 
 
 
 
Basic (in shares)
27,378,299 
27,333,693 
27,391,159 
27,293,898 
Diluted (in shares)
27,378,299 
27,333,693 
27,391,159 
27,293,898 
Condensed Consolidated Statements of Comprehensive Loss—Unaudited (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net loss
$ (2,596)
$ (832)
$ (6,515)
$ (1,539)
Other comprehensive income (loss):
 
 
 
 
Change in foreign currency translation adjustment
(3)
Comprehensive loss
$ (2,599)
$ (831)
$ (6,509)
$ (1,532)
Condensed Consolidated Statements of Cash Flows—Unaudited (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
Net loss
$ (6,515)
$ (1,539)
Adjustments to reconcile net loss to net cash provided (used) in operating activities:
 
 
Depreciation
3,308 
3,387 
Stock-based compensation expense
2,754 
1,862 
Gain on sale of domain
(1,000)
Provision for deferred income taxes
(2,636)
(468)
Loss in equity interest
829 
314 
Change in assets and liabilities, net of effect of acquisition:
 
 
Accounts receivable, net
(2,338)
1,265 
Prepaid expenses and other current assets
(84)
(408)
Other long-term assets
221 
115 
Accounts payable
(2,099)
(2,586)
Accrued expenses and other current liabilities
1,877 
(1,246)
Other long-term liabilities
(611)
64 
Net cash provided (used) in operating activities
(6,294)
760 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
Purchases of property and equipment
(3,945)
(4,550)
Investment in equity interest
(605)
(400)
Proceeds from sale of domain
1,000 
Cash paid for business acquisition
(500)
Purchase of convertible promissory note
(1,000)
Net cash used in investing activities
(3,550)
(6,450)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
Repayments on capital lease obligations
(1,700)
(1,662)
Proceeds from exercise of common stock options
62 
179 
Purchase of treasury stock
(562)
Net cash used in financing activities
(2,200)
(1,483)
Effect of exchange rate changes on cash and cash equivalents
NET DECREASE IN CASH AND CASH EQUIVALENTS
(12,038)
(7,166)
CASH AND CASH EQUIVALENTS—Beginning of period
36,397 
41,944 
CASH AND CASH EQUIVALENTS—End of period
24,359 
34,778 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 
 
Cash paid for interest
186 
125 
Cash paid for income taxes
112 
138 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:
 
 
Property and equipment financed under capital lease obligations
1,458 
490 
Service agreement financed under capital lease obligations
31 
Accrued property and equipment expenditures
39 
808 
Stock based compensation capitalized to property and equipment
37 
Treasury stock received to satisfy minimum tax withholding liabilities
$ 9 
$ 0 
The Company and Summary of Significant Accounting Policies
The Company and Summary of Significant Accounting Policies
The Company and Summary of Significant Accounting Policies
Synacor, Inc., together with its consolidated subsidiary, Synacor Canada, Inc. (collectively, the “Company”), is a leading provider of start experiences (startpages and homescreens), TV Everywhere, Identity Management (“IDM”) and various cloud-based services across multiple devices for cable, satellite, telecom and consumer electronics companies. The Company is also a leading provider of authentication and aggregation solutions enabling the delivery of personalized online content. The Company's technology allows its customers to package a wide array of personalized online content and cloud-based services with their high-speed Internet, communications, television and other digital offerings. The Company's customers offer the Company's services under their own brands on Internet-enabled devices such as PCs, tablets, smartphones and connected TVs.
Basis of Presentation — The interim unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned subsidiary. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise have the power to control, are accounted for using the equity method and are included as investments in equity interest on the condensed consolidated balance sheets. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the interim unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented. These interim unaudited condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (as amended).
Accounting Estimates — The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. 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 values of assets and liabilities. Such estimates primarily relate to unsettled transactions and events as of the date of the consolidated financial statements. Accordingly, actual results may differ from estimated amounts.
Concentrations of Risk — As of December 31, 2013 and September 30, 2014, and for the three and nine months ended September 30, 2013 and 2014, the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
December 31,
2013
 
September 31,
2014
Google
47
%
 
22
%
Display Advertising Partner
11
%
 
10
%

    
 
Revenue
 
Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
Google
50
%
 
39
%
 
52
%
 
45
%



For the three and nine months ended September 30, 2013 and 2014, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to customers for their supply of Internet traffic on the Company's start experiences:
 
 
Cost of Revenue
 
Cost of Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
Customer A
24
%
 
22
%
 
21
%
 
23
%
Customer B
13
%
 
14
%
 
13
%
 
13
%
Customer C (1)
10
%
 
N/A

 
11
%
 
10
%
Customer D
15
%
 
16
%
 
13
%
 
12
%

Notes:
(1)
For the three months ended September 30, 2014, the cost of revenue-share payments received by Customer C were less than 10%.
Sale of Domain In June 2014, the Company executed a transaction to sell a domain name of its legacy business. The sale amounted to $1.0 million and the entire amount was recorded as a gain on the sale in the consolidated statement of operations during the second quarter of 2014.

Rights Plan On July 14, 2014 the board of directors declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock and adopted a stockholder rights plan (the “Rights Plan”). The dividend was paid on July 14, 2014 to the stockholders of record at the close of business on that date. Each Right allows its holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock (a “ Series A Junior Preferred Share”) for $10.00 per share (the “Exercise Price”), if the Rights become exercisable. This portion of a Series A Junior Preferred Share will give the stockholder approximately the same dividend, voting, and liquidation rights as would one share of common stock. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights. On July 14, 2014, in conjunction with the adoption of the Rights Plan, the Company designated 2,000,000 shares of its Preferred Stock as Series A Junior Participating Preferred Stock.

The Rights will not be exercisable until 10 days after the public announcement that a person or group has become an “Acquiring Person” by obtaining beneficial ownership of 10% or more of the Company’s outstanding common stock (the “Distribution Date”). If a person or group becomes an Acquiring Person, each Right will entitle its holder (other than such Acquiring Person) to purchase for $10.00 per share, a number of shares of the Company’s common stock having a market value of twice such price based on the market price of the common stock prior to such acquisition. Additionally, if the Company is acquired in a merger or similar transaction after the Distribution Date, each Right will entitle its holder (other than such Acquiring Person) to purchase for $10.00 per share, a number of shares of the acquiring corporation with a market value of $20.00 per share based on the market price of the acquiring corporation’s stock, prior to such merger. In addition, at any time after a person or group becomes an Acquiring Person, but before such Acquiring Person or group owns 50% or more of the Company’s common stock, the board of directors may exchange one share of the Company’s common stock for each outstanding Right (other than Rights owned by such Acquiring Person, which would have become void). An Acquiring Person will not be entitled to exercise the Rights.
The Rights will expire on July 14, 2017, provided that if the Company’s stockholders have not ratified the Rights Plan by July 14, 2015, the Rights will expire on such date.
Reduction In Workforce — On September 28, 2014, the Company's board of directors approved a cost reduction plan. The plan involves a reduction in the Company’s workforce by approximately 70 employees. The pretax severance charge and outplacement services resulting from the reduction in workforce, combined with the Company's separation from its former Chief Operating Officer, amounted to $1.3 million. Of the $1.3 million in costs, $0.5 million was recorded to research and development, $0.2 million was recorded to sales and marketing and $0.6 million was recorded to general and administrative in the accompanying statement of operations for the three and nine months ended September 30, 2014. As of September 30, 2014, $1.1 million of the reduction in workforce costs remain in accrued expenses and other current liabilities on the condensed consolidated balance sheet.

Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09 (ASU 2014-09) "Revenue from Contracts with Customers." ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on the consolidated financial statements.
Investments and Fair Value Measurements
Investments and Fair Value Measurements
Investments and Fair Value Measurements
In July 2013, the Company made a $1.0 million investment (in the form of a convertible promissory note) in a privately held Delaware corporation called Blazer and Flip Flops, Inc., or B&FF (doing business as The Experience Engine). B&FF is a professional services company whose principals have experience integrating its customers' systems with their consumers' devices, including smartphones and tablets.
The investment in B&FF is considered an available-for-sale security and is reported on the Company’s condensed consolidated balance sheets as a convertible promissory note.
The provisions of the FASB Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures, establish a framework for measuring the fair value in accordance with U.S. GAAP and establish a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value as follows:
Level 1 - Level 1 inputs are defined as observable inputs such as quoted prices in active markets.
Level 2 - Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Level 3 inputs are unobservable inputs that reflect the Company’s determination of assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including the Company’s own data.
The Company classifies its investment in B&FF within Level 3 because it is valued using unobservable inputs. As of September 30, 2014, the estimated fair value is equal to the carrying amount, which was the purchase price of $1.0 million.
Property and Equipment - Net
Property and Equipment - Net
Property and Equipment—Net
Property and equipment, net consisted of the following:
 
December 31,
2013
 
September 30,
2014
 
(in thousands)
Computer equipment (1)
$
19,361

 
$
20,920

Computer software
4,625

 
5,241

Furniture and fixtures
1,634

 
1,772

Leasehold improvements
1,044

 
1,232

Work in process (primarily software development costs)
3,893

 
6,148

Other
173

 
173

 
30,730

 
35,486

Less accumulated depreciation (2)
(16,645
)
 
(19,950
)
Total property and equipment—net
$
14,085

 
$
15,536

Notes:
(1)
Includes equipment under capital lease obligations of $5.3 million and $6.7 million as of December 31, 2013 and September 30, 2014, respectively.

(2)
Includes $2.1 million and $3.0 million of accumulated depreciation of equipment under capital leases as of December 31, 2013 and September 30, 2014, respectively.
Accrued Expenses and Other Current Liabilities
Accrued Expenses and Other Current Liabilities
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
 
December 31,
2013
 
September 30, 2014
 
(in thousands)
Accrued compensation
$
2,787

 
$
4,066

Accrued content fees
580

 
1,300

Unearned revenue on contracts
247

 
410

Other
1,563

 
1,274

Total
$
5,177

 
$
7,050

Information About Segment and Geographic Areas
Information About Segment and Geographic Areas
Information About Segment and Geographic Areas
Operating segments are components of the Company in which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker for the Company is the Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a total Company basis, accompanied by information about revenue by major service line for purposes of allocating resources and evaluating financial performance. Profitability measures by service line are not routinely prepared or used. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the Company level. Accordingly, the Company has determined that it has a single reporting segment and operating unit structure.
The following table sets forth revenue and long-lived tangible assets by geographic area:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
 
(in thousands)
 
(in thousands)
Revenue
 
 
 
 
 
 
 
United States
$
26,386

 
$
26,070

 
$
81,883

 
$
75,174

International
165

 
161

 
519

 
496

Total revenue
$
26,551

 
$
26,231

 
$
82,402

 
$
75,670

 
December 31,
2013
 
September 30,
2014
 
(in thousands)
Long-lived tangible assets
 
 
 
United States
$
13,825

 
$
15,040

Canada

 
411

International
260

 
85

Total long-lived tangible assets
$
14,085

 
$
15,536

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Contract Commitments — The Company is obligated to make payments under various contracts with vendors and other business partners, principally for revenue-share and content arrangements. Contract commitments as of September 30, 2014 are summarized as follows:
Year ending December 31:
(in thousands)
2014 (remaining three months)
$
1,288

2015
1,630

2016
1,080

2017
360

2018

Due after 5 years

Total contract commitments
$
4,358


Teknision Acquisition — The balance of the approximately $1.0 million purchase price to acquire the assets of Teknision, Inc. ("Teknision") is due in May 2015 unless such amount is offset in satisfaction of certain indemnification obligations of Teknision. The remaining payment of $0.5 million is recorded in accrued expenses and other current liabilities on the condensed consolidated balance sheet.
Litigation From time to time, the Company is a party to legal actions. In the opinion of management, the outcome of these matters is not expected to have a material impact on the consolidated financial statements of the Company.
Equity
Equity
Equity
Common Stock — Effective on February 15, 2012, the Company’s board of directors and stockholders approved the Fifth Amended and Restated Certificate of Incorporation. The total number of common shares that the Company is authorized to issue is 100,000,000 with a par value of $0.01 per share.
Preferred Stock — Effective on February 15, 2012, the Company’s board of directors and stockholders approved the Fifth Amended and Restated Certificate of Incorporation. The total number of preferred shares that the Company is authorized to issue is 10,000,000 with a par value of $0.01 per share, 2,000,000 of which have been designated as Series A Junior Participating Preferred Stock pursuant to the Rights Plan. None have been issued to date.
Stock Repurchases Effective February 26, 2014 the board of directors approved a Stock Repurchase Program, which authorizes a repurchase of up to $5.0 million worth of the Company's outstanding common stock. The Stock Repurchase Program has no expiration date, and may be suspended or discontinued at any time without notice. The Company repurchased all shares with cash resources.
The following table sets forth the shares of common stock repurchased through the program:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
Shares of common stock repurchased

 

 

 
229,050

Value of common stock repurchased (in thousands)
$

 
$

 
$

 
$
562


Withhold to Cover — During the nine months ended September 30, 2014, certain employees, in lieu of paying withholding taxes on the vesting of certain shares of restricted stock awards, authorized the withholding of 3,603 shares of the Company's common stock to satisfy their minimum statutory tax withholding requirements related to such vesting. These shares were recorded as treasury stock using the cost method at the per share closing price on the date of vesting. No shares of the Company's common stock were withheld to cover minimum statutory tax withholding requirements during the nine months ended September 30, 2013.
Stock-based Compensation
Stock-based Compensation
Stock-based Compensation
The fair value of each stock option was determined on the date of grant using the Black-Scholes option pricing model, and stock-based compensation is recorded over the requisite service period. The Company recorded $0.7 million and $1.2 million of stock-based compensation expense for the three months ended September 30, 2013 and 2014, respectively. Stock-based compensation for the nine months ended September 30, 2013 and 2014 amounted to $1.9 million and $2.8 million, respectively. No income tax deduction is allowed for incentive stock options ("ISOs"). Accordingly, no deferred income tax asset is recorded for the potential tax deduction related to these options. Expense related to stock option grants of non-qualified stock options ("NSOs") result in a temporary difference, which gives rise to a deferred tax asset.
Total stock-based compensation expense included in the accompanying condensed consolidated statements of operations for the periods presented, is as follows :
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013

2014
 
2013
 
2014
 
(in thousands)
 
(in thousands)
Research and development
$
318


$
691


$
860


$
1,392

Sales and marketing
97


129


249


361

General and administrative
268


406


753


1,001

Total stock-based compensation expense
$
683


$
1,226


$
1,862


$
2,754


Stock Option Activity — A summary of the stock option activity for the nine months ended September 30, 2014 is presented below:
 
Number of
Stock
Options
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic Value
(in thousands)
 
Weighted Average Remaining Contractual Term (in years)
Outstanding—January 1, 2014
5,770,168

 
$
3.85

 
 
 
 
Granted (1)
4,972,895

 
$
2.56

 
 
 
 
Exercised
(236,755
)
 
$
0.26

 
 
 
 
Forfeited (1)
(2,978,768
)
 
$
4.50

 
 
 
 
Outstanding—September 30, 2014
7,527,540

 
$
2.85

 
$
283

 
7.17
Vested and expected to vest—September 30, 2014
6,869,530

 
$
2.89

 
$
283

 
6.97
Vested and exercisable—September 30, 2014
3,341,870

 
$
3.18

 
$
281

 
4.55

Note:
(1) The number of options granted and forfeited includes options cancelled and replaced in conjunction with the modifications described below.

Aggregate intrinsic value represents the difference between the Company’s closing stock price of its common stock and the exercise price of outstanding, in-the-money options. The Company’s closing stock price as reported on the NASDAQ as of September 30, 2014 was $1.91 per share. The total intrinsic value of options exercised for the three months ended September 30, 2014 was minor and total intrinsic value of options exercised for the nine months ended September 30, 2014 amounted to $0.5 million. The weighted average fair value of options issued, excluding the options issued as replacements in the modifications below, during the nine months ended September 30, 2014 amounted to $1.32.
As of September 30, 2014, the unrecognized compensation cost related to non-vested options granted, for which vesting is probable, under the plan was approximately $6.8 million. This cost is expected to be recognized over a weighted-average period of 2.9 years. The total fair value of shares vested was $1.3 million for the nine months ended September 30, 2014.
Option Modifications — Pursuant to the transition agreement the Company entered into in March 2014 with Ronald Frankel, its former President and CEO, 752,725 of Mr. Frankel's options to purchase common stock of the Company were modified to accelerate vesting for options that would have otherwise been forfeited during the transition period to the beginning of the transition period ("Transition Date"), and the period options are exercisable is now the earlier of the third anniversary of the Transition Date or the original 10 year contractual term of each option. The total incremental expense resulting from Mr. Frankel's modification is $0.2 million.
Effective August 4, 2014, the compensation committee of the Company's board of directors agreed to modify all outstanding employee options with an exercise price of $3.00 per share or greater, other than options held by directors and executive officers, by resetting the exercise price per share to the closing price of the Company's common stock on August 4, 2014. As a result of the modification, 203 employees had a total of 1,547,382 options reset to an exercise price of $2.38 per share. The total incremental compensation expense resulting from the August 2014 modification is $0.6 million. During the three and nine months ended September 30, 2014, the Company recorded $0.3 million expense related to the modification. The remaining expense will be recorded over the remaining requisite service period.

Non-plan Option Grant On August 4, 2014, the Company appointed Himesh Bhise as President and CEO of the Company. In conjunction with the effective date of Mr. Bhise's first day of employment, and as part of Mr. Bhise's compensation, the Company awarded Mr. Bhise options to purchase 2,001,338 shares of the Company's common stock with an exercise price of $2.38 per share.

RSU Activity A summary of RSU activity for the nine months ended September 30, 2014, is as follows:
 
Number of
Shares
 
Weighted-Average
Grant Date Fair
Value
Unvested—January 1, 2014
45,000

 
$
5.46

Granted
913,638

 
$
2.22

Released
(10,250
)
 
$
5.64

Forfeited
(39,000
)
 
$
2.70

Unvested—September 30, 2014
909,388

 
$
2.32

Expected to vest—September 30, 2014
825,609

 
$
2.43


As of September 30, 2014, total unrecognized compensation cost, adjusted for estimated forfeitures, related to RSUs was approximately $2.1 million, which is expected to be recognized over the next 2.9 years.
Investment in Equity Interest
Investment in Equity Interest
Investment in Equity Interest
In March 2013, the Company entered into a Joint Venture Agreement, pursuant to which it owns 50% of the outstanding common stock and 100% of the preferred stock of Synacor China, Ltd., or the JV Company. The Company has agreed to provide up to $2.0 million in funding to the JV Company over the two-year period following the initial funding. The Company provided $0.9 million of funding to the JV Company during the year ended December 31, 2013, and $0.6 million of funding during the nine months ended September 30, 2014. The JV Company will, through its wholly foreign-owned subsidiary in the People's Republic of China (the “PRC”), supply start experiences, authentication and aggregation solutions for the delivery of online content and services to customers in the PRC.
    
The investment in the JV Company is being accounted for using the equity method and is classified as an investment in equity interest on the Company’s condensed consolidated balance sheets. The Company records its share of the results of the JV Company within earnings in equity interest. Because the Company provided nearly all of the capital to form the JV Company, the Company has recorded 100% of the losses incurred by the JV Company within loss in equity interest in the condensed consolidated statements of operations. Since acquiring its interest in the JV Company in 2013, the Company has recorded, in accumulated deficit, cumulative losses in equity interest of $1.4 million.
    
The following tables represents summarized financial information of the JV Company for the three and nine months ended September 30, 2013 and 2014, and as of December 31, 2013 and September 30, 2014:

Three Months Ended September 30,

Nine Months Ended September 30,

2013

2014

2013

2014

(in thousands)

(in thousands)
Revenue
$


$


$


$

Loss from operations
(120
)
 
(239
)
 
(314
)
 
(829
)
Net loss
$
(120
)

$
(239
)

$
(314
)

$
(829
)
 
December 31,
2013
 
September 30,
2014
 
(in thousands)
Total assets
$
442

 
$
218

Total liabilities
$
77

 
$
77

Net Income (Loss) Per Common Share Data
Net Income (Loss) Per Common Share Data
Net Income (Loss) Per Common Share Data
Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. The Company’s potential common shares consist of the incremental common shares issuable upon the exercise of stock options, and to a lesser extent, shares issuable upon the release of RSUs. The dilutive effect of these potential common shares is reflected in diluted earnings per share by application of the treasury stock method.
The following table presents the calculation of basic and diluted net loss per share for the three and nine month periods ended September 30, 2013 and 2014:
 
Three Months Ended,
September 30,
 
Nine Months Ended,
September 30,
 
2013
 
2014
 
2013
 
2014
 
(in thousands, except share and per share data)
Basic net loss per share:


 


 


 


  Numerator:


 


 


 


        Net loss
$
(832
)
 
$
(2,596
)
 
$
(1,539
)
 
$
(6,515
)
  Denominator:
 
 
 
 


 


        Weighted-average common shares outstanding
27,333,693

 
27,378,299

 
27,293,898

 
27,391,159

 
 
 
 
 
 
 
 
Basic net loss per share
$
(0.03
)
 
$
(0.09
)
 
$
(0.06
)
 
$
(0.24
)
 
 
 
 
 
 
 
 
Diluted net loss per share:
 
 
 
 


 


  Numerator:
 
 
 
 


 


        Net loss
$
(832
)
 
$
(2,596
)
 
$
(1,539
)
 
$
(6,515
)
  Denominator:
 
 
 
 


 


        Number of shares used in basic calculation
27,333,693

 
27,378,299

 
27,293,898

 
27,391,159

        Add weighted-average effect of dilutive securities:
 
 
 
 
 
 
 
              None

 

 

 

  Number of shares used in diluted calculation
27,333,693

 
27,378,299

 
27,293,898

 
27,391,159

 
 
 
 
 
 
 
 
Diluted net loss per share
$
(0.03
)
 
$
(0.09
)
 
$
(0.06
)
 
$
(0.24
)

The following equivalent shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:
 
Three Months Ended,
September 30,
 
Nine Months Ended
September 30,
  
2013
 
2014
 
2013
 
2014
Antidilutive equity awards:
 
 
 
 
 
 
 
Stock options and RSUs
5,529,388

 
8,436,928

 
5,529,388

 
8,436,928

Subsequent Events
Subsequent Events
Subsequent Events

Amendment to Loan Agreement — On October 28, 2014, the Company entered into the First Amendment to the Loan and Security Agreement (the “Amendment”) with Silicon Valley Bank (“SVB”), which amends the financial covenants and certain definitions that are used in the financial covenants of the Loan and Security Agreement dated as of September 27, 2013 (the “ Loan Agreement”). The changes to financial covenants and certain definitions are effective September 30, 2014.

The Loan Agreement provides for a $10.0 million secured revolving line of credit with a stated maturity date of September 27, 2015. The secured revolving credit facility is available for cash borrowings and is subject to a borrowing formula based upon eligible accounts receivable. Borrowings under the Loan Agreement bear interest, at the Company’s election, at an annual rate of either 0.50% above the “prime rate” as published in The Wall Street Journal or LIBOR for the relevant period plus 3.00%. The Loan Agreement is secured by a first priority security interest in all the Company’s assets, including its intellectual property. As of September 30, 2014 and through the date of this filing, the Company is in compliance with its covenants under the Loan Agreement.

Board of Directors Appointment — Effective October 28, 2014, the board of directors appointed Scott Murphy as a director of the Company.  This appointment fills the one remaining vacancy on the Company's board of directors. Mr. Murphy will be a Class III director and serve in this role until the 2017 annual meeting of stockholders. Mr. Murphy was also appointed to the audit committee. Consistent with the Company’s non-employee director compensation policy, Mr. Murphy will receive annual cash retainers for his service on the board and the audit committee and an initial stock option grant of 50,000 shares.
The Company and Summary of Significant Accounting Policies (Policies)
Basis of Presentation — The interim unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned subsidiary. Investments in entities in which the Company can exercise significant influence, but does not own a majority equity interest or otherwise have the power to control, are accounted for using the equity method and are included as investments in equity interest on the condensed consolidated balance sheets. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the interim unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented. These interim unaudited condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (as amended).
Accounting Estimates — The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. 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 values of assets and liabilities. Such estimates primarily relate to unsettled transactions and events as of the date of the consolidated financial statements. Accordingly, actual results may differ from estimated amounts.
Concentrations of Risk — As of December 31, 2013 and September 30, 2014, and for the three and nine months ended September 30, 2013 and 2014, the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
December 31,
2013
 
September 31,
2014
Google
47
%
 
22
%
Display Advertising Partner
11
%
 
10
%

    
 
Revenue
 
Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
Google
50
%
 
39
%
 
52
%
 
45
%



For the three and nine months ended September 30, 2013 and 2014, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to customers for their supply of Internet traffic on the Company's start experiences:
 
 
Cost of Revenue
 
Cost of Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
Customer A
24
%
 
22
%
 
21
%
 
23
%
Customer B
13
%
 
14
%
 
13
%
 
13
%
Customer C (1)
10
%
 
N/A

 
11
%
 
10
%
Customer D
15
%
 
16
%
 
13
%
 
12
%

Notes:
(1)
For the three months ended September 30, 2014, the cost of revenue-share payments received by Customer C were less than 10%.
Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09 (ASU 2014-09) "Revenue from Contracts with Customers." ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on the consolidated financial statements.

The Company and Summary of Significant Accounting Policies (Tables)
Schedule of concentrations equal to or exceeding 10% of the Company's accounts receivable, revenue, and cost of revenue
For the three and nine months ended September 30, 2013 and 2014, the following customers received revenue-share payments equal to or exceeding 10% of the Company’s cost of revenue. The costs represent revenue share paid to customers for their supply of Internet traffic on the Company's start experiences:
 
 
Cost of Revenue
 
Cost of Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
Customer A
24
%
 
22
%
 
21
%
 
23
%
Customer B
13
%
 
14
%
 
13
%
 
13
%
Customer C (1)
10
%
 
N/A

 
11
%
 
10
%
Customer D
15
%
 
16
%
 
13
%
 
12
%

Notes:
(1)
For the three months ended September 30, 2014, the cost of revenue-share payments received by Customer C were less than 10%.
As of December 31, 2013 and September 30, 2014, and for the three and nine months ended September 30, 2013 and 2014, the Company had concentrations equal to or exceeding 10% of the Company’s accounts receivable and revenue as follows:
 
Accounts Receivable
 
December 31,
2013
 
September 31,
2014
Google
47
%
 
22
%
Display Advertising Partner
11
%
 
10
%

    
 
Revenue
 
Revenue
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
Google
50
%
 
39
%
 
52
%
 
45
%

Property and Equipment - Net (Tables)
Schedule of property and equipment
Property and equipment, net consisted of the following:
 
December 31,
2013
 
September 30,
2014
 
(in thousands)
Computer equipment (1)
$
19,361

 
$
20,920

Computer software
4,625

 
5,241

Furniture and fixtures
1,634

 
1,772

Leasehold improvements
1,044

 
1,232

Work in process (primarily software development costs)
3,893

 
6,148

Other
173

 
173

 
30,730

 
35,486

Less accumulated depreciation (2)
(16,645
)
 
(19,950
)
Total property and equipment—net
$
14,085

 
$
15,536

Notes:
(1)
Includes equipment under capital lease obligations of $5.3 million and $6.7 million as of December 31, 2013 and September 30, 2014, respectively.

(2)
Includes $2.1 million and $3.0 million of accumulated depreciation of equipment under capital leases as of December 31, 2013 and September 30, 2014, respectively.
Accrued Expenses and Other Current Liabilities (Tables)
Schedule of accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
 
December 31,
2013
 
September 30, 2014
 
(in thousands)
Accrued compensation
$
2,787

 
$
4,066

Accrued content fees
580

 
1,300

Unearned revenue on contracts
247

 
410

Other
1,563

 
1,274

Total
$
5,177

 
$
7,050

Information About Segment and Geographic Areas (Tables)
Schedule of revenue and long-lived tangible assets by geographic area
The following table sets forth revenue and long-lived tangible assets by geographic area:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
 
(in thousands)
 
(in thousands)
Revenue
 
 
 
 
 
 
 
United States
$
26,386

 
$
26,070

 
$
81,883

 
$
75,174

International
165

 
161

 
519

 
496

Total revenue
$
26,551

 
$
26,231

 
$
82,402

 
$
75,670

 
December 31,
2013
 
September 30,
2014
 
(in thousands)
Long-lived tangible assets
 
 
 
United States
$
13,825

 
$
15,040

Canada

 
411

International
260

 
85

Total long-lived tangible assets
$
14,085

 
$
15,536

Commitments and Contingencies (Tables)
Schedule of contract commitments
Contract commitments as of September 30, 2014 are summarized as follows:
Year ending December 31:
(in thousands)
2014 (remaining three months)
$
1,288

2015
1,630

2016
1,080

2017
360

2018

Due after 5 years

Total contract commitments
$
4,358

Equity (Tables)
Schedule of stock repurchased
The following table sets forth the shares of common stock repurchased through the program:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013
 
2014
 
2013
 
2014
Shares of common stock repurchased

 

 

 
229,050

Value of common stock repurchased (in thousands)
$

 
$

 
$

 
$
562

Stock-based Compensation (Tables)
Total stock-based compensation expense included in the accompanying condensed consolidated statements of operations for the periods presented, is as follows :
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2013

2014
 
2013
 
2014
 
(in thousands)
 
(in thousands)
Research and development
$
318


$
691


$
860


$
1,392

Sales and marketing
97


129


249


361

General and administrative
268


406


753


1,001

Total stock-based compensation expense
$
683


$
1,226


$
1,862


$
2,754

A summary of the stock option activity for the nine months ended September 30, 2014 is presented below:
 
Number of
Stock
Options
 
Weighted
Average
Exercise
Price
 
Aggregate
Intrinsic Value
(in thousands)
 
Weighted Average Remaining Contractual Term (in years)
Outstanding—January 1, 2014
5,770,168

 
$
3.85

 
 
 
 
Granted (1)
4,972,895

 
$
2.56

 
 
 
 
Exercised
(236,755
)
 
$
0.26

 
 
 
 
Forfeited (1)
(2,978,768
)
 
$
4.50

 
 
 
 
Outstanding—September 30, 2014
7,527,540

 
$
2.85

 
$
283

 
7.17
Vested and expected to vest—September 30, 2014
6,869,530

 
$
2.89

 
$
283

 
6.97
Vested and exercisable—September 30, 2014
3,341,870

 
$
3.18

 
$
281

 
4.55

Note:
(1) The number of options granted and forfeited includes options cancelled and replaced in conjunction with the modifications described below.
A summary of RSU activity for the nine months ended September 30, 2014, is as follows:
 
Number of
Shares
 
Weighted-Average
Grant Date Fair
Value
Unvested—January 1, 2014
45,000

 
$
5.46

Granted
913,638

 
$
2.22

Released
(10,250
)
 
$
5.64

Forfeited
(39,000
)
 
$
2.70

Unvested—September 30, 2014
909,388

 
$
2.32

Expected to vest—September 30, 2014
825,609

 
$
2.43

Investment in Equity Interest (Tables)
Summarized financial information
The following tables represents summarized financial information of the JV Company for the three and nine months ended September 30, 2013 and 2014, and as of December 31, 2013 and September 30, 2014:

Three Months Ended September 30,

Nine Months Ended September 30,

2013

2014

2013

2014

(in thousands)

(in thousands)
Revenue
$


$


$


$

Loss from operations
(120
)
 
(239
)
 
(314
)
 
(829
)
Net loss
$
(120
)

$
(239
)

$
(314
)

$
(829
)
 
December 31,
2013
 
September 30,
2014
 
(in thousands)
Total assets
$
442

 
$
218

Total liabilities
$
77

 
$
77

Net Income (Loss) Per Common Share Data (Tables)
The following table presents the calculation of basic and diluted net loss per share for the three and nine month periods ended September 30, 2013 and 2014:
 
Three Months Ended,
September 30,
 
Nine Months Ended,
September 30,
 
2013
 
2014
 
2013
 
2014
 
(in thousands, except share and per share data)
Basic net loss per share:


 


 


 


  Numerator:


 


 


 


        Net loss
$
(832
)
 
$
(2,596
)
 
$
(1,539
)
 
$
(6,515
)
  Denominator:
 
 
 
 


 


        Weighted-average common shares outstanding
27,333,693

 
27,378,299

 
27,293,898

 
27,391,159

 
 
 
 
 
 
 
 
Basic net loss per share
$
(0.03
)
 
$
(0.09
)
 
$
(0.06
)
 
$
(0.24
)
 
 
 
 
 
 
 
 
Diluted net loss per share:
 
 
 
 


 


  Numerator:
 
 
 
 


 


        Net loss
$
(832
)
 
$
(2,596
)
 
$
(1,539
)
 
$
(6,515
)
  Denominator:
 
 
 
 


 


        Number of shares used in basic calculation
27,333,693

 
27,378,299

 
27,293,898

 
27,391,159

        Add weighted-average effect of dilutive securities:
 
 
 
 
 
 
 
              None

 

 

 

  Number of shares used in diluted calculation
27,333,693

 
27,378,299

 
27,293,898

 
27,391,159

 
 
 
 
 
 
 
 
Diluted net loss per share
$
(0.03
)
 
$
(0.09
)
 
$
(0.06
)
 
$
(0.24
)
The following equivalent shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:
 
Three Months Ended,
September 30,
 
Nine Months Ended
September 30,
  
2013
 
2014
 
2013
 
2014
Antidilutive equity awards:
 
 
 
 
 
 
 
Stock options and RSUs
5,529,388

 
8,436,928

 
5,529,388

 
8,436,928

The Company and Summary of Significant Accounting Policies - Concentrations of Risk (Details) (Customer Concentration Risk [Member])
9 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2014
Accounts Receivable [Member]
Google [Member]
Dec. 31, 2013
Accounts Receivable [Member]
Google [Member]
Sep. 30, 2014
Accounts Receivable [Member]
Display Advertising Partner [Member]
Dec. 31, 2013
Accounts Receivable [Member]
Display Advertising Partner [Member]
Sep. 30, 2014
Revenue [Member]
Google [Member]
Sep. 30, 2013
Revenue [Member]
Google [Member]
Sep. 30, 2014
Revenue [Member]
Google [Member]
Sep. 30, 2013
Revenue [Member]
Google [Member]
Sep. 30, 2014
Cost of Revenue [Member]
Customer A [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer A [Member]
Sep. 30, 2014
Cost of Revenue [Member]
Customer A [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer A [Member]
Sep. 30, 2014
Cost of Revenue [Member]
Customer B [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer B [Member]
Sep. 30, 2014
Cost of Revenue [Member]
Customer B [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer B [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer C [Member]
Sep. 30, 2014
Cost of Revenue [Member]
Customer C [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer C [Member]
Sep. 30, 2014
Cost of Revenue [Member]
Customer D [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer D [Member]
Sep. 30, 2014
Cost of Revenue [Member]
Customer D [Member]
Sep. 30, 2013
Cost of Revenue [Member]
Customer D [Member]
Schedule of concentrations equal to or exceeding 10% of the Company's accounts receivable and revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Concentration risk, percentage
22.00% 
47.00% 
10.00% 
11.00% 
39.00% 
50.00% 
45.00% 
52.00% 
22.00% 
24.00% 
23.00% 
21.00% 
14.00% 
13.00% 
13.00% 
13.00% 
10.00% 1
10.00% 1
11.00% 1
16.00% 
15.00% 
12.00% 
13.00% 
The Company and Summary of Significant Accounting Policies - Sale of Domain (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Jun. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
 
 
 
Gain on sale of domain
$ 0 
$ 1,000 
$ 0 
$ 1,000 
$ 0 
The Company and Summary of Significant Accounting Policies - Rights Plan (Details) (USD $)
0 Months Ended
Jul. 14, 2014
Sep. 30, 2014
Jul. 14, 2014
Dec. 31, 2013
Feb. 15, 2012
Class of Warrant or Right [Line Items]
 
 
 
 
 
Common stock dividend declared, number of preferred share purchase rights for each outstanding share of common stock
 
 
 
 
Number of shares called by each Right
 
 
0.01 
 
 
Exercise price (in dollars per share)
 
 
10.00 
 
 
Preferred stock, shares authorized
 
10,000,000 
 
10,000,000 
10,000,000 
Exercisable period after public announcement
10 days 
 
 
 
 
Beneficial ownership threshold of common stock for rights be become exercisable
10.00% 
 
 
 
 
Market value of acquiring corporation shares (in dollars per share)
 
 
$ 20.00 
 
 
Minimum ownership percentage of common stock Board of Directors may no longer exchange common stock
50.00% 
 
 
 
 
Exchange of common stock for Right, exchange ratio
 
 
 
 
Series A Junior Participating Preferred Stock [Member]
 
 
 
 
 
Class of Warrant or Right [Line Items]
 
 
 
 
 
Preferred stock, shares authorized
2,000,000 
 
2,000,000 
 
 
The Company and Summary of Significant Accounting Policies - Reduction in Workforce (Details) (Reduction in Workforce [Member], USD $)
In Millions, unless otherwise specified
0 Months Ended 3 Months Ended 9 Months Ended
Sep. 28, 2014
employee
Sep. 30, 2014
Sep. 30, 2014
Restructuring Cost and Reserve [Line Items]
 
 
 
Reduction in workforce, number of employees
70 
 
 
Severance Costs
 
$ 1.3 
$ 1.3 
Research and Development Expense [Member]
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Severance Costs
 
0.5 
0.5 
Selling and Marketing Expense [Member]
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Severance Costs
 
0.2 
0.2 
General and Administrative Expense [Member]
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Severance Costs
 
0.6 
0.6 
Accrued Expenses and Other Current Liabilities [Member]
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
Restructuring reserve
 
$ 1.1 
$ 1.1 
Investments and Fair Value Measurements (Details) (USD $)
1 Months Ended 9 Months Ended
Jul. 31, 2013
Sep. 30, 2014
Sep. 30, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
Payments to acquire investment
$ 1,000,000 
$ 0 
$ 1,000,000 
Level 3 [Member]
 
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
Estimated fair value of convertible promissory note
 
$ 1,000,000 
 
Property and Equipment - Net (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Schedule of property and equipment
 
 
Property and equipment-gross
$ 35,486 
$ 30,730 
Less accumulated depreciation
(19,950)1
(16,645)1
Total property and equipment—net
15,536 
14,085 
Computer equipment [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
20,920 2
19,361 2
Computer software [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
5,241 
4,625 
Furniture and fixtures [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
1,772 
1,634 
Leasehold improvements [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
1,232 
1,044 
Work in process [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
6,148 
3,893 
Other [Member]
 
 
Schedule of property and equipment
 
 
Property and equipment-gross
$ 173 
$ 173 
Property and Equipment - Net - Additional Disclosures (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Property and Equipment - Net (Textual) [Abstract]
 
 
Property and equipment-gross
$ 35,486 
$ 30,730 
Accumulated depreciation of equipment under capital leases
19,950 1
16,645 1
Capital lease obligations [Member]
 
 
Property and Equipment - Net (Textual) [Abstract]
 
 
Accumulated depreciation of equipment under capital leases
3,000 
2,100 
Computer equipment [Member]
 
 
Property and Equipment - Net (Textual) [Abstract]
 
 
Property and equipment-gross
20,920 2
19,361 2
Computer equipment [Member] |
Capital lease obligations [Member]
 
 
Property and Equipment - Net (Textual) [Abstract]
 
 
Property and equipment-gross
$ 6,700 
$ 5,300 
Accrued Expenses and Other Current Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Schedule of accrued expenses and other current liabilities
 
 
Accrued compensation
$ 4,066 
$ 2,787 
Accrued content fees
1,300 
580 
Unearned revenue on contracts
410 
247 
Other
1,274 
1,563 
Total
$ 7,050 
$ 5,177 
Information About Segment and Geographic Areas (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
manager
segment
Sep. 30, 2013
Dec. 31, 2013
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
Number of segment managers accountable for operations below the Company level
 
 
 
 
Number of reportable segments
 
 
 
 
Number of operating units
 
 
 
 
Schedule of revenue and long-lived tangible assets by geographic area
 
 
 
 
 
Revenue
$ 26,231 
$ 26,551 
$ 75,670 
$ 82,402 
 
Long-lived tangible assets
15,536 
 
15,536 
 
14,085 
United States [Member]
 
 
 
 
 
Schedule of revenue and long-lived tangible assets by geographic area
 
 
 
 
 
Revenue
26,070 
26,386 
75,174 
81,883 
 
Long-lived tangible assets
15,040 
 
15,040 
 
13,825 
Canada [Member]
 
 
 
 
 
Schedule of revenue and long-lived tangible assets by geographic area
 
 
 
 
 
Long-lived tangible assets
411 
 
411 
 
International [Member]
 
 
 
 
 
Schedule of revenue and long-lived tangible assets by geographic area
 
 
 
 
 
Revenue
161 
165 
496 
519 
 
Long-lived tangible assets
$ 85 
 
$ 85 
 
$ 260 
Commitments and Contingencies - Contract Commitments (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Schedule of contract commitments
 
2014 (remaining three months)
$ 1,288 
2015
1,630 
2016
1,080 
2017
360 
2018
Due after 5 years
Total contract commitments
$ 4,358 
Commitments and Contingencies - Teknision Acquisition (Details) (Teknision, Inc [Member], USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Teknision, Inc [Member]
 
Business Acquisition [Line Items]
 
Aggregate purchase price
$ 1.0 
Remaining payment for acquisition
$ 0.5 
Equity (Details) (USD $)
0 Months Ended
Feb. 26, 2014
Sep. 30, 2014
Dec. 31, 2013
Feb. 15, 2012
Jul. 14, 2014
Series A Junior Participating Preferred Stock [Member]
Class of Stock [Line Items]
 
 
 
 
 
Common stock, shares authorized
 
100,000,000 
100,000,000 
100,000,000 
 
Common stock, par value (in dollars per share)
 
$ 0.01 
$ 0.01 
$ 0.01 
 
Preferred stock, shares authorized
 
10,000,000 
10,000,000 
10,000,000 
2,000,000 
Preferred stock, par value (in dollars per share)
 
$ 0.01 
$ 0.01 
$ 0.01 
 
Preferred stock, shares issued
 
 
 
Shares authorized to be repurchased, amount
$ 5,000,000 
 
 
 
 
Equity - Shares Repurchased (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Equity [Abstract]
 
 
 
 
Shares of common stock repurchased
229,050 
Value of common stock repurchased (in thousands)
$ 0 
$ 0 
$ 562 
$ 0 
Equity - Withhold to Cover (Details)
9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Equity [Abstract]
 
 
Shares withheld to satisfy minimum statutory tax withholding requirements
3,603 
Stock-based Compensation - Allocation of Stock-based Compensation Expense (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Schedule of total stock-based compensation expense
 
 
 
 
Total stock-based compensation expense
$ 1,226 
$ 683 
$ 2,754 
$ 1,862 
Research and development [Member]
 
 
 
 
Schedule of total stock-based compensation expense
 
 
 
 
Total stock-based compensation expense
691 
318 
1,392 
860 
Sales and marketing [Member]
 
 
 
 
Schedule of total stock-based compensation expense
 
 
 
 
Total stock-based compensation expense
129 
97 
361 
249 
General and administrative [Member]
 
 
 
 
Schedule of total stock-based compensation expense
 
 
 
 
Total stock-based compensation expense
$ 406 
$ 268 
$ 1,001 
$ 753 
Stock-based Compensation - Stock Option Activity (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Number of Stock Options (shares)
 
Outstanding number of stock options beginning balance
5,770,168 
Number of stock options granted
4,972,895 1
Number of stock options exercised
(236,755)
Number of stock options forfeited
(2,978,768)1
Outstanding number of stock options ending balance
7,527,540 
Outstanding number of stock options vested and expected to vest
6,869,530 
Outstanding number of stock options vested and exercisable
3,341,870 
Weighted Average Exercise Price (in dollars per share)
 
Outstanding, weighted average exercise price, beginning balance
$ 3.85 
Weighted average exercise price, granted
$ 2.56 1
Weighted average exercise price, exercised
$ 0.26 
Weighted average exercise price, forfeited
$ 4.50 1
Outstanding, weighted average exercise price, ending balance
$ 2.85 
Vested and expected to vest, weighted average exercise price, ending balance
$ 2.89 
Vested and exercisable, weighted average exercise price, ending balance
$ 3.18 
Aggregate intrinsic value, outstanding
$ 283 
Aggregate intrinsic value, vested and expected to vest
283 
Aggregate intrinsic value, vested and exercisable
$ 281 
Weighted average remaining contractual term (in years), outstanding
7 years 1 month 30 days 
Weighted average remaining contractual term (in years), vested and expected to vest
6 years 11 months 19 days 
Weighted average remaining contractual term (in years), vested and exercisable
4 years 6 months 17 days 
Stock-based Compensation - RSU Activity (Details) (Restricted Stock Units (RSUs) [Member], USD $)
9 Months Ended
Sep. 30, 2014
Restricted Stock Units (RSUs) [Member]
 
Number of Shares
 
Unvested—January 1, 2014
45,000 
Granted
913,638 
Released
(10,250)
Forfeited
(39,000)
Unvested—September 30, 2014
909,388 
Expected to vest—September 30, 2014
825,609 
Weighted-Average Grant Date Fair Value (in dollars per share)
 
Unvested—January 1, 2014
$ 5.46 
Granted
$ 2.22 
Released
$ 5.64 
Forfeited
$ 2.70 
Unvested—September 30, 2014
$ 2.32 
Expected to vest—September 30, 2014
$ 2.43 
Stock-based Compensation - Additional Disclosures (Details) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Stock Options [Member]
Sep. 30, 2014
Restricted Stock Units (RSUs) [Member]
Sep. 30, 2014
Former Chief Executive Officer [Member]
Sep. 30, 2014
Former Chief Executive Officer [Member]
Stock Options [Member]
Aug. 4, 2014
Employees, Excluding Directors and Officers [Member]
employee
Aug. 4, 2014
Employees, Excluding Directors and Officers [Member]
Stock Options [Member]
Aug. 4, 2014
CEO [Member]
Aug. 4, 2014
Minimum [Member]
Employees, Excluding Directors and Officers [Member]
Sep. 30, 2014
Option Modification [Member]
Employees, Excluding Directors and Officers [Member]
Sep. 30, 2014
Option Modification [Member]
Employees, Excluding Directors and Officers [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense
$ 1,226,000 
$ 683,000 
$ 2,754,000 
$ 1,862,000 
 
 
 
 
 
 
 
 
$ 300,000 
$ 300,000 
Tax deduction allowed for incentive stock options