FITBIT INC, 10-Q filed on 11/6/2017
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2017
Oct. 27, 2017
Common Class A [Member]
Oct. 27, 2017
Common Class B [Member]
Entity Information [Line Items]
 
 
 
Entity Registrant Name
FITBIT INC 
 
 
Entity Central Index Key
0001447599 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-Q 
 
 
Document Period End Date
Sep. 30, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
Q3 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
205,456,462 
31,323,349 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 280,681 
$ 301,320 
Marketable securities
378,548 
404,693 
Accounts receivable, net
260,990 
477,825 
Inventories
138,781 
230,387 
Prepaid expenses and other current assets
173,654 
66,346 
Total current assets
1,232,654 
1,480,571 
Property and equipment, net
90,823 
76,553 
Goodwill
51,036 
51,000 
Intangible assets, net
23,943 
27,521 
Deferred tax assets
46,221 
174,097 
Other assets
9,900 
10,448 
Total assets
1,454,577 
1,820,226 
Current liabilities:
 
 
Accounts payable
178,476 
313,773 
Accrued liabilities
346,157 
390,561 
Deferred revenue
40,058 
49,904 
Income taxes payable
293 
7,694 
Total current liabilities
564,984 
761,932 
Other liabilities
57,958 
59,762 
Total liabilities
622,942 
821,694 
Commitments and contingencies (Note 6)
   
   
Stockholders’ equity:
 
 
Class A and Class B common stock
23 
23 
Additional paid-in capital
930,929 
859,345 
Accumulated other comprehensive loss
(12,861)
(978)
Retained earnings (accumulated deficit)
(86,456)
140,142 
Total stockholders’ equity
831,635 
998,532 
Total liabilities and stockholders’ equity
$ 1,454,577 
$ 1,820,226 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Income Statement [Abstract]
 
 
 
 
Revenue
$ 392,522 
$ 503,802 
$ 1,044,763 
$ 1,595,686 
Cost of revenue
217,762 
263,144 
602,459 
876,304 
Gross profit
174,760 
240,658 
442,304 
719,382 
Operating expenses:
 
 
 
 
Research and development
84,170 
82,972 
252,471 
235,129 
Sales and marketing
77,536 
79,872 
269,442 
305,061 
General and administrative
40,690 
33,333 
102,815 
106,297 
Total operating expenses
202,396 
196,177 
624,728 
646,487 
Operating income (loss)
(27,636)
44,481 
(182,424)
72,895 
Interest income, net
1,162 
970 
2,451 
2,391 
Other income (expense), net
(702)
(1,037)
134 
68 
Income (loss) before income taxes
(27,176)
44,414 
(179,839)
75,354 
Income tax expense
86,227 
18,294 
51,883 
31,900 
Net income (loss)
$ (113,403)
$ 26,120 
$ (231,722)
$ 43,496 
Net income (loss) per share:
 
 
 
 
Basic (in dollars per share)
$ (0.48)
$ 0.12 
$ (1.00)
$ 0.20 
Diluted (in dollars per share)
$ (0.48)
$ 0.11 
$ (1.00)
$ 0.18 
Shares used to compute net income (loss) per share:
 
 
 
 
Basic (in shares)
234,242 
222,412 
230,918 
219,079 
Diluted (in shares)
234,242 
243,687 
230,918 
242,652 
Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income (loss)
$ (113,403)
$ 26,120 
$ (231,722)
$ 43,496 
Cash flow hedges:
 
 
 
 
Change in unrealized gain (loss) on cash flow hedges, net of tax benefit (expense) of $192, $155, ($7) and $(1,315), respectively
(6,793)
(221)
(20,582)
2,784 
Less: reclassification for realized net gains included in net income, net of tax expense (benefit) of $-, $-, $7 and $509, respectively
6,617 
(2,850)
8,264 
(4,828)
Net change, net of tax
(176)
(3,071)
(12,318)
(2,044)
Change in foreign currency translation adjustment
0 
(39)
314 
(199)
Change in unrealized loss on available-for-sale investments, net of tax
48 
(164)
133 
(38)
Less reclassification for realized net gains
0 
0 
(12)
0 
Other comprehensive income (loss)
48 
(164)
121 
(38)
Comprehensive income (loss)
$ (113,531)
$ 22,846 
$ (243,605)
$ 41,215 
Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Change in unrealized gain (loss) on cash flow hedges, tax
$ 192 
$ 155 
$ (7)
$ (1,315)
Reclassification for realized net gains included in net income, tax
$ 0 
$ 0 
$ 7 
$ 509 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Cash Flows from Operating Activities
 
 
Net income (loss)
$ (231,722)
$ 43,496 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
Provision for doubtful accounts
7,805 
0 
Provision for inventory obsolescence
13,395 
1,014 
Depreciation
28,338 
23,883 
Write-off of property and equipment
5,250 
762 
Amortization of intangible assets
4,134 
1,578 
Stock-based compensation
67,256 
58,175 
Deferred income taxes
132,815 
(27,794)
Other
1,301 
(323)
Changes in operating assets and liabilities, net of acquisitions:
 
 
Accounts receivable
208,899 
7,756 
Inventories
79,448 
(50,883)
Prepaid expenses and other assets
(125,504)
(38,788)
Fitbit Force recall reserve
(668)
(3,628)
Accounts payable
(122,160)
(13,125)
Accrued liabilities and other liabilities
(48,201)
43,285 
Deferred revenue
(9,846)
554 
Income taxes payable
(1,822)
19,756 
Net cash provided by operating activities
8,718 
65,718 
Cash Flows from Investing Activities
 
 
Purchase of property and equipment
(58,199)
(66,798)
Purchases of marketable securities
(494,540)
(552,752)
Sales of marketable securities
19,806 
45,011 
Maturities of marketable securities
500,576 
249,269 
Acquisitions, net of cash acquired
(556)
(5,600)
Net cash used in investing activities
(32,913)
(330,870)
Cash Flows from Financing Activities
 
 
Payments of offering costs
0 
(1,236)
Proceeds from issuance of common stock
13,893 
18,316 
Taxes paid related to net share settlement of restricted stock units
(10,804)
(3,228)
Net cash provided by financing activities
3,089 
13,852 
Net decrease in cash and cash equivalents
(21,106)
(251,300)
Effect of exchange rate on cash and cash equivalents
467 
(326)
Cash and cash equivalents at beginning of period
301,320 
535,846 
Cash and cash equivalents at end of period
$ 280,681 
$ 284,220 
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
 
The accompanying condensed consolidated financial statements of Fitbit, Inc. (the “Company”) are unaudited. The condensed consolidated balance sheet at December 31, 2016 has been derived from the audited financial statements of the Company. The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information, and in management’s opinion, includes all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position, its results of operations, and cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full fiscal year or any other period.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the Securities and Exchange Commission (“SEC”) on March 1, 2017.

The Company’s fiscal year ends on December 31 of each year. The Company is on a 4-4-5 week quarterly calendar. There were 91 days in each of the three months ended September 30, 2017 and October 1, 2016, and 273 and 275 days in the nine months ended September 30, 2017 and October 1, 2016, respectively.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

Reclassifications of certain prior period amounts in the condensed consolidated financial statements have been made to conform to the current period presentation. 

Use of Estimates
 
The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. The primary estimates and assumptions made by management are related to revenue recognition, reserves for sales returns and incentives, reserves for warranty, valuation of stock options, fair value of derivative assets and liabilities, allowance for doubtful accounts, inventory valuation, fair value of goodwill and acquired tangible and intangible assets and liabilities assumed during acquisitions, the number of reporting segments, the recoverability of intangible assets and their useful lives, contingencies, and the valuations of deferred income tax assets and uncertain tax positions. Actual results could differ from those estimates, and such differences may be material to the condensed consolidated financial statements.

Significant Accounting Policies

There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report on Form 10-K, except for the policies described below and the adoption of Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting, discussed below in the section titled “Accounting Pronouncements Recently Adopted.”

Rights of Return, Stock Rotation Rights, and Price Protection

The Company offers limited rights of return, stock rotation rights, and price protection under various policies and programs with its retailer and distributor customers and end-users. Below is a summary of the general provisions of such policies and programs:

•
Retailers and distributors are generally allowed to return products that were originally sold through to an end-user under provisions of their contracts, called “open-box” returns, and such returns may be made at any time after original sale.
•
All purchases through Fitbit.com are covered by a 45-day right of return.
•
Distributors are allowed stock rotation rights which are limited rights of return of products purchased during a prior period, generally one quarter.
•
Distributors and retailers are allowed return rights for defective products.
•
Certain distributors are offered price protection that allows for the right to a partial credit for unsold inventory held by the distributor if the Company reduces the selling price of a product.

The Company estimates reserves for these policies and programs based on historical experience and records the reserves as a reduction of revenue and accounts receivable. Through September 30, 2017, actual returns have primarily been open-box returns. In addition, through September 30, 2017, the Company has had limited price protection claims. On a quarterly basis, the amount of revenue that is reserved for future returns is calculated based on historical trends and data specific to each reporting period. The historical trends consider product life cycles, new product introductions, market acceptance of products, product sell-through, the type of customer, seasonality, and other factors. Return rates can fluctuate over time, but have been sufficiently predictable to allow the Company to estimate expected future product returns. The Company reviews the actual returns evidenced in prior quarters as a percent of related revenue to determine the historical rate of returns. The Company then applies the historical rate of returns to the current period revenue as a basis for estimating future returns. When necessary, the Company also provides a specific reserve for products in the distribution channel in excess of estimated requirements. This estimate can be affected by the amount of a particular product in the channel, the rate of sell-through, product plans, and other factors. The Company also considers whether there are circumstances which may result in anticipated returns higher than the historical return rate from direct customers and records an additional specific reserve as necessary. The estimates and assumptions used to reserve for rights of return, stock rotation rights, and price protection have been accurate in all material respects and have not materially changed in the past.

Product Warranty

The Company offers a standard product warranty that its products will operate under normal use for a period of one-year from the date of original purchase, except in the European Union and certain Asia Pacific countries where the Company provides a two-year warranty. The Company has the obligation, at its option, to either repair or replace a defective product. At the time revenue is recognized, an estimate of future warranty costs is recorded as a component of cost of revenues. The estimate of future warranty costs is based on historical and projected warranty claim rates, historical and projected cost-per-claim and knowledge of specific product failures, if any, that are outside of the Company’s typical experience. The Company regularly review these estimates to assess the appropriateness of its recorded warranty liabilities and adjust the amounts as necessary. Factors that affect the warranty obligation include product failure rates, service delivery costs incurred in correcting the product failures, and warranty policies. The warranty obligation does not consider historical experience of the Fitbit Force product as a separate reserve has been established for the Fitbit Force recall. The Company’s products are manufactured by contract manufacturers, and in certain cases, the Company may have recourse against such contract manufacturers. Should actual product failure rates, use of materials or other costs differ from the Company’s estimates, additional warranty liabilities could be incurred, which could materially affect the Company’s results of operations. The estimates and assumptions used to reserve for product warranty have been accurate in all material respects and have not materially changed in the past.

Customer Bankruptcy

In September 2017, Wynit Distribution (“Wynit”) filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Wynit was the Company’s largest customer, historically representing 11% of total revenue during the six months ended July 1, 2017 and 19% of total accounts receivables as of July 1, 2017. In connection with Wynit’s bankruptcy filing, the Company believes that the collectability of the product shipments to Wynit during the third quarter of 2017 was not reasonably assured. However, as of July 1, 2017, collectability of accounts receivables from Wynit was reasonably assured. 

The Company ceased to recognize revenue from Wynit, which totaled $8.1 million during the third quarter of 2017. Additionally, the Company recorded a charge of $35.8 million during the third quarter ended September 30, 2017 comprised of cost of revenue of $5.5 million associated with shipments to Wynit in the third quarter of 2017 and bad debt expense of $30.3 million associated with all of Wynit’s outstanding accounts receivables. The Company maintains credit insurance that covers a portion of the exposure related to its customer receivables. The Company recorded an insurance receivable based on an analysis of its insurance policies, including their exclusions, an assessment of the nature of the claim, and information from its insurance carrier. As of September 30, 2017, the Company has recorded an insurance receivable of $26.8 million, which is included in prepaid expenses and other current assets, associated with the amount it has concluded is probable related to the claim. The $26.8 million insurance receivable allowed the Company to recover $22.7 million of bad debt expense and $4.1 million of cost of revenue, resulting in a net charge of $9.0 million in the consolidated statement of operations comprised of net bad debt expense of $7.6 million and net cost of revenue of $1.4 million. The Company will continue to assess the probable amount of insurance proceeds expected to be received in future reporting periods until the final resolution, and make adjustments, if necessary, based on additional facts as they arise.

Non-Monetary Transaction

The Company entered into an agreement with a third party during 2016 to exchange inventory for advertising credits and cash. The Company recorded the transaction based on the estimated fair value of the products exchanged. For the year ended December 31, 2016, the Company recorded $15.0 million of revenue and $7.0 million of associated cost of goods sold upon exchange of the products for advertising credits of $13.0 million and cash of $2.0 million. The $13.0 million of unused advertising credits remaining as of December 31, 2016 were recorded in prepaid expenses and other current assets, and other assets. Such credits are expected to be used over the contractual period of four years, and will be expensed as advertising services are received. During the three and nine months ended September 30, 2017, $0.0 million and $0.3 million of credits were utilized, respectively. The Company’s prepaid and other assets related to unused advertising credits as of September 30, 2017 and December 31, 2016 were $12.7 million and $13.0 million, respectively.

Out-of-Period Adjustment

During the first quarter of 2016, the Company identified an error, which resulted in an understatement of income tax expense by $3.0 million for the year ended December 31, 2015. The Company recorded an out-of-period adjustment to correct the error in the quarter ended April 2, 2016. The Company assessed the materiality of this error and concluded the error was not material to the 2015 and 2016 consolidated financial statements, and therefore, recorded the correction in the first quarter of 2016.

Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (the “FASB”), issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which affects any entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the currently effective guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 will become effective for the Company on January 1, 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. In April 2016, the FASB issued ASU 2016-10, which clarifies guidance on identifying performance obligations and licensing implementation. The Company currently expects to adopt the new revenue recognition standard as of January 1, 2018, utilizing the modified retrospective transition method. The Company’s implementation team has made progress in its project plan, which includes evaluating customer contracts across the organization, developing policies, processes and tools to report financial results, and implementing and evaluating the Company’s internal controls over financial reporting that will be necessary under the new standard. Although the new standard may, in certain circumstances, impact the timing of when revenue is recognized for products shipped, and the timing and classification of certain sales incentives, which are expected to generally be recognized earlier than under existing guidance, the Company believes the new guidance is materially consistent with its current revenue recognition policy. In addition, the Company has determined that the presentation of certain reserve balances currently shown net within accounts receivable will be presented as refund liabilities within current liabilities upon adoption. The Company does not currently expect the adoption to have a material impact on its consolidated financial statements. The Company is continuing to make progress in evaluating the impact of the adoption and preliminary assessments are subject to change.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize right-of-use assets and lease liabilities for operating leases, initially measured at the present value of the lease payments, on the balance sheet. ASU 2016-02 will become effective for the Company on January 1, 2019, and requires adoption using a modified retrospective approach. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. The Company anticipates that the adoption will have a material impact on its consolidated balance sheets, as it will now include a right of use asset and a lease liability for the obligation to make lease payments related to substantially all operating lease arrangements; however, the Company does not expect the adoption to have a material impact on its consolidated statements of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable and available for sale debt securities. ASU 2016-13 will become effective for the Company on January 1, 2020 and early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 provides guidance intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 will become effective for the Company on January 1, 2018 and early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. The second step measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-04, a company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 was issued to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a share-based payment award. ASU 2017-09 will become effective for the Company on January 1, 2018 with early adoption permitted. The amendments to ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 amends the hedge accounting rules to simplify the application of hedge accounting guidance and better portray the economic results of risk management activities in the financial statements. The guidance expands the ability to hedge non-financial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. ASU 2017-12 will become effective for the Company on January 1, 2019 with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
 
    
Accounting Pronouncements Recently Adopted

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Upon adoption, ASU 2016-09 requires that excess tax benefits for share-based payments be recorded as a reduction of income tax expense and reflected within operating cash flows, rather than being recorded within equity and reflected within financing cash flows. ASU 2016-09 also permits the repurchase of more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company’s cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. ASU 2016-09 became effective for the Company on January 1, 2017. The adoption of ASU 2016-09 resulted in a cumulative effect adjustment of $4.9 million to increase retained earnings as of January 1, 2017, related to the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The Company elected to apply the change in presentation of excess tax benefits in the condensed consolidated statement of cash flows retrospectively, which resulted in an increase in net cash provided by operations and a decrease in net cash provided by financing activities of $25.5 million for the nine months ended October 1, 2016.  The Company also elected to make an accounting policy change to recognize forfeitures starting on January 1, 2017 on a prospective basis.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
 
The carrying values of the Company’s accounts receivable, accounts payable, and accrued liabilities approximated their fair values due to the short period of time to maturity or repayment.
 
The following tables set forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
 
 
September 30, 2017
 
Level 1
 
Level 2
 
Total
 
 
 
 
 
 
Assets:
 
 
 
 
 
Money market funds
$
129,790

 
$
—

 
$
129,790

U.S. government agencies
—

 
50,707

 
50,707

Corporate debt securities
—

 
375,891

 
375,891

Derivative assets
—

 
1,307

 
1,307

Total
$
129,790

 
$
427,905

 
$
557,695

Liabilities:
 
 
 
 
 
Derivative liabilities
$
—

 
$
11,826

 
$
11,826


 
December 31, 2016
 
Level 1
 
Level 2
 
Total
 
 
 
 
 
 
Assets:
 
 
 
 
 
Money market funds
$
50,125

 
$
—

 
$
50,125

U.S. government agencies
—

 
86,526

 
86,526

Corporate debt securities
—

 
390,286

 
390,286

Derivative assets
—

 
10,625

 
10,625

Total
$
50,125

 
$
487,437

 
$
537,562

Liabilities:
 
 
 
 
 
Derivative liabilities
$
—

 
$
3,780

 
$
3,780


 
The fair value of the Company’s Level 1 financial instruments is based on quoted market prices in active markets for identical instruments. The fair value of the Company’s Level 2 financial instruments is based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data.

In addition, Level 2 assets and liabilities include derivative financial instruments associated with hedging activity, which are further discussed in Note 3. Derivative financial instruments are initially measured at fair value on the contract date and are subsequently remeasured to fair value at each reporting date using inputs such as spot rates, forward rates, and discount rates. There is not an active market for each hedge contract, but the inputs used to calculate the value of the instruments are tied to active markets.

There were no Level 3 assets or liabilities as of September 30, 2017 and December 31, 2016. There have been no transfers between fair value measurement levels during the three and nine months ended September 30, 2017 and October 1, 2016.
Financial Instruments
Financial Instruments
Financial Instruments

Cash, Cash Equivalents and Marketable Securities

The Company’s marketable securities are classified as available-for-sale as of the balance sheet date and are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity. Because the Company views marketable securities as available to support current operations as needed, it has classified all available-for-sale securities as current assets. Realized gains or losses and other-than-temporary impairments, if any, on available-for-sale securities are reported in other income (expense), net, as incurred.

Investments are reviewed periodically to identify potential other-than-temporary impairments. No impairment loss has been recorded on the securities included in the tables below because the Company believes that the decrease in fair value of these securities is temporary and expects to recover up to, or beyond, the initial cost of investment for these securities.

The following table sets forth cash, cash equivalents and marketable securities as of September 30, 2017 (in thousands):
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Cash and Cash Equivalents
 
Marketable Securities
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
102,841

 
$
—

 
$
—

 
$
102,841

 
$
102,841

 
$
—

Money market funds
129,790

 
—

 
—

 
129,790

 
129,790

 
—

U.S. government agencies
50,703

 
4

 
—

 
50,707

 
25,795

 
24,912

Corporate debt securities
375,959

 
50

 
(118
)
 
375,891

 
22,255

 
353,636

Total
$
659,293

 
$
54

 
$
(118
)
 
$
659,229

 
$
280,681

 
$
378,548


The following table sets forth cash, cash equivalents and marketable securities as of December 31, 2016 (in thousands):
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Cash and Cash Equivalents
 
Marketable Securities
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
179,076

 
$
—

 
$
—

 
$
179,076

 
$
179,076

 
$
—

Money market funds
50,125

 
—

 
—

 
50,125

 
50,125

 
—

U.S. government agencies
86,533

 
8

 
(15
)
 
86,526

 
—

 
86,526

Corporate debt securities
390,466

 
24

 
(204
)
 
390,286

 
72,119

 
318,167

Total
$
706,200

 
$
32

 
$
(219
)
 
$
706,013

 
$
301,320

 
$
404,693



The gross unrealized gains or losses on marketable securities as of September 30, 2017 and December 31, 2016 were not material. There were no available-for-sale investments as of September 30, 2017 and December 31, 2016 that have been in a continuous unrealized loss position for greater than 12 months on a material basis.

The following table classifies marketable securities by contractual maturities (in thousands):
 
September 30, 2017
 
December 31, 2016
 
 
 
 
Due in one year
$
364,734

 
$
355,152

Due in one to two years
13,814

 
49,541

Total
$
378,548

 
$
404,693



Derivative Financial Instruments

The Company operates in foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies. In order to manage this risk, the Company may hedge a portion of its foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted revenues and expenses, using foreign currency exchange forward or option contracts. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. The Company does not enter into derivative contracts for trading or speculative purposes.
 
Cash Flow Hedges
 
The Company has entered into foreign currency derivative contracts designated as cash flow hedges to hedge certain forecasted revenue and expense transactions denominated in currencies other than the U.S. dollar. The Company’s cash flow hedges consist of forward contracts with maturities of 12 months or less.

The Company periodically assesses the effectiveness of its cash flow hedges. Effectiveness represents a derivative instrument’s ability to generate offsetting changes in cash flows related to the hedged risk. The Company records the gains or losses, net of tax, related to the effective portion of its cash flow hedges as a component of accumulated other comprehensive income (loss) in stockholders’ equity and subsequently reclassifies the gains or losses into revenue and operating expenses when the underlying hedged transactions are recognized. The Company records the gains or losses related to the ineffective and excluded time value portion of the cash flow hedges, if any, immediately in other income (expense), net. If the hedged transaction becomes probable of not occurring, the corresponding amounts in accumulated other comprehensive income (loss) would immediately be reclassified to other income (expense), net. Cash flows related to the Company’s cash flow hedging program are recognized as cash flows from operating activities in its statements of cash flows.

The Company had outstanding contracts with a total notional amount of $142.7 million and $0 million in cash flow hedges for forecasted revenue and expense transactions, respectively, as of September 30, 2017, and $20.0 million and $20.9 million in cash flow hedges for forecasted revenue and expense transactions, respectively, as of December 31, 2016.

Balance Sheet Hedges

The Company enters into foreign exchange contracts to hedge certain monetary assets and liabilities that are denominated in currencies other than the functional currency of its subsidiaries. These foreign exchange contracts are carried at fair value, do not qualify for hedge accounting treatment, and are not designated as hedging instruments. Changes in the value of the foreign exchange contracts are recognized in other income (expense), net, and offset the foreign currency gain or loss on the underlying net monetary assets or liabilities.

The Company had outstanding balance sheet hedges with a total notional amount of $93.6 million and $177.0 million as of September 30, 2017 and December 31, 2016, respectively.
 
Fair Value of Foreign Currency Derivatives

The foreign currency derivative contracts that were not settled at the end of the period are recorded at fair value, on a gross basis, in the condensed consolidated balance sheets. The following table presents the fair value of the Company’s foreign currency derivative contracts as of the periods presented (in thousands):
 
 
 
September 30, 2017
 
December 31, 2016
 
Balance Sheet Location
 
Fair Value Derivative
Assets
 
Fair Value Derivative Liabilities
 
Fair Value Derivative
Assets
 
Fair Value Derivative Liabilities
 
 
 
 
 
 
 
 
 
 
Cash flow designated hedges
Prepaid expenses and other current assets
 
$
—

 
$
—

 
$
813

 
$
—

Cash flow designated hedges
Accrued liabilities
 
—

 
11,826

 
—

 
1,428

Hedges not designated
Prepaid expenses and other current assets
 
1,307

 
—

 
9,812

 
—

Hedges not designated
Accrued liabilities
 
—

 
—

 
—

 
2,352

Total fair value of derivative instruments
 
 
$
1,307

 
$
11,826

 
$
10,625

 
$
3,780



Financial Statement Effect of Foreign Currency Derivative Contracts

The following table presents the pre-tax impact of the Company’s foreign currency derivative contracts on other comprehensive income (“OCI”) and the condensed consolidated statements of operations for the periods presented (in thousands):
 
 
 
Three Months Ended
 
Nine Months Ended
 
Income Statement Location
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
 
 
Foreign exchange cash flow hedges:
 
 
 
 
 
 
 
 
 
Gain (loss) recognized in OCI – effective portion
 
 
$
(6,603
)
 
$
(560
)
 
$
(20,590
)
 
$
975

Gain (loss) reclassified from OCI into income – effective portion
Revenue
 
(6,617
)
 
3,060

 
(6,897
)
 
1,511

Gain (loss) reclassified from OCI into income – effective portion
Operating expenses
 
—

 
(65
)
 
(1,405
)
 
2,343

Gain (loss) recognized in income – ineffective portion
Other income (expense), net
 
—

 
76

 
21

 
(109
)
 
 
 
 
 
 
 
 
 
 
Gain recognized in income – excluded time value portion
Other income (expense), net
 
672

 
—

 
1,516

 
—

 
 
 
 
 
 
 
 
 
 
Foreign exchange balance sheet hedges:
 
 
 
 
 
 
 
 
 
Gain (loss) recognized in income
Other income (expense), net
 
(2,062
)
 
(477
)
 
(8,838
)
 
3,567



As of September 30, 2017, all net derivative gains related to the Company’s cash flow hedges will be reclassified from OCI into revenue and operating expense within the next 12 months.

Offsetting of Foreign Currency Derivative Contracts

The Company presents its derivative assets and derivative liabilities at gross fair values in the condensed consolidated balance sheets. The Company generally enters into master netting arrangements, which mitigate credit risk by permitting net settlement of transactions with the same counterparty. The Company is not required to pledge, and is not entitled to receive, cash collateral related to these derivative instruments.

The following tables set forth the available offsetting of net derivative assets under the master netting arrangements as of September 30, 2017 and December 31, 2016 (in thousands):

 
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
 
Gross Amounts Not Offset in Condensed Consolidated Balance Sheets
September 30, 2017
Gross Amounts Recognized
 
Gross Amounts Offset
 
Net Amounts Presented
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts assets
$
1,307

 
$
—

 
$
1,307

 
$
1,307

 
$
—

 
$
—

Foreign exchange contracts liabilities
11,826

 
—

 
11,826

 
1,307

 
—

 
10,519

 
 
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
 
Gross Amounts Not Offset in Condensed Consolidated Balance Sheets
December 31, 2016
Gross Amounts Recognized
 
Gross Amounts Offset
 
Net Amounts Presented
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts assets
$
10,625

 
$
—

 
$
10,625

 
$
3,780

 
$
—

 
$
6,845

Foreign exchange contracts liabilities
3,780

 
—

 
3,780

 
3,780

 
—

 
—

Balance Sheet Components
Balance Sheet Components
Balance Sheet Components
 
Revenue Returns Reserve
 
Revenue returns reserve activities were as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Beginning balances
$
51,520

 
$
80,277

 
$
98,851

 
$
74,045

Increases
146,356

 
46,654

 
236,267

 
166,205

Returns taken
(135,978
)
 
(59,763
)
 
(273,220
)
 
(173,082
)
Ending balances
$
61,898

 
$
67,168

 
$
61,898

 
$
67,168



Increases in the revenue returns reserve include provisions for open box returns and stock rotations.

Inventories
 
Inventories consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
  
 
 
 
 
 
Components
$
9,072

 
$
1,035

Finished goods
129,709

 
229,352

Total inventories
$
138,781

 
$
230,387


 
Prepaid Expenses and Other Current Assets
 
Prepaid expenses and other current assets consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
  
 
 
 
 
 
Income tax receivable
$
96,467

 
$
481

POP displays, net
16,189

 
22,804

Prepaid marketing
3,865

 
5,764

Derivative assets
1,307

 
10,625

Prepaid expenses
16,508

 
17,161

Insurance receivable
26,795

—

—

Other
12,523

 
9,511

Total prepaid expenses and other current assets
$
173,654

 
$
66,346



Property and Equipment, Net
 
Property and equipment, net, consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
  
 
 
 
 
 
Tooling and manufacturing equipment
$
55,713

 
$
60,944

Furniture and office equipment
18,463

 
14,424

Purchased and internally-developed software
18,524

 
12,032

Leasehold improvements
45,867

 
28,489

Total property and equipment
138,567

 
115,889

Less: Accumulated depreciation and amortization
(47,744
)
 
(39,336
)
Property and equipment, net
$
90,823

 
$
76,553


 
Goodwill and Intangible Assets

The carrying amount of goodwill was $51.0 million as of September 30, 2017 and December 31, 2016. See Note 11 for additional information.

The carrying amounts of the intangible assets as of September 30, 2017 and December 31, 2016 were as follows (in thousands, except useful life). In-process research and development is not amortized until the completion or abandonment of the related development.
 
September 30, 2017
 
December 31, 2016
 
Weighted Average Remaining Useful Life
(years)
  
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed technology
$
26,648

 
$
(7,209
)
 
$
19,439

 
$
26,092

 
$
(3,247
)
 
$
22,845

 
4.7
Trademarks and other
1,278

 
(714
)
 
564

 
1,278

 
(542
)
 
736

 
1.2
Total finite-lived intangible assets subject to amortization, net
27,926

 
(7,923
)
 
20,003

 
27,370

 
(3,789
)
 
23,581

 
 
In-process research and development
3,940

 
—

 
3,940

 
3,940

 
—

 
3,940

 
 
Total intangible assets, net
$
31,866

 
$
(7,923
)
 
$
23,943

 
$
31,310

 
$
(3,789
)
 
$
27,521

 
 


Total amortization expense related to intangible assets was $1.4 million and $0.5 million for the three months ended September 30, 2017 and October 1, 2016, respectively, and $4.1 million and $1.6 million for the nine months ended September 30, 2017 and October 1, 2016, respectively.

The estimated future amortization expense of acquired finite-lived intangible assets to be charged to cost of revenue and operating expenses after September 30, 2017 is as follows (in thousands):
  
Cost of Revenue
 
Operating Expenses
 
Total
 
 
 
 
 
 
Remaining 2017
$
1,333

 
$
58

 
$
1,391

2018
5,332

 
230

 
5,562

2019
4,552

 
230

 
4,782

2020
3,772

 
46

 
3,818

2021
3,772

 
—

 
3,772

Thereafter
678

 
—

 
678

Total finite-lived intangible assets, net
$
19,439

 
$
564

 
$
20,003



Accrued Liabilities
 
Accrued liabilities consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
  
 
Product warranty
$
86,679

 
$
99,923

Accrued manufacturing expense and freight
43,045

 
75,579

Accrued sales incentives
66,237

 
74,181

Accrued sales and marketing
28,711

 
41,948

Accrued co-op advertising and marketing development funds
18,273

 
40,002

Sales taxes and VAT payable
17,098

 
8,891

Employee-related liabilities
28,484

 
13,934

Inventory received but not billed
5,663

 
7,363

Accrued legal fees
7,319

 
3,963

Derivative liabilities
11,826

 
3,780

Other
32,822

 
20,997

Accrued liabilities
$
346,157

 
$
390,561



Product warranty reserve activities were as follows (in thousands)(1):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Beginning balances
$
72,761

 
$
76,841

 
$
99,923

 
$
40,212

Charged to cost of revenue
26,825

 
47,042

 
44,167

 
148,494

Changes related to pre-existing warranties
5,669

 
(18,727
)
 
8,142

 
(19,214
)
Settlement of claims
(18,576
)
 
(42,215
)
 
(65,553
)
 
(106,551
)
Ending balances
$
86,679

 
$
62,941

 
$
86,679

 
$
62,941

 

(1) 
Does not include reserves established as a result of the recall of the Fitbit Force. See the section titled “—Fitbit Force Recall Reserve” in the Company’s Annual Report on Form 10-K for additional information regarding such reserves.

In the first quarter of 2017, the Company corrected the allocation of customer support costs and freight and fulfillment to the amounts reported in “Charged to cost of revenue” and “Settlement of claims.” Those costs are included in the beginning and ending balances. Further, the Company does not consider this adjustment to be material and there was no impact to its condensed consolidated balance sheets and statements of operations.

Restructuring

In January 2017, the Company announced cost-efficiency measures to be implemented in 2017 that include realigning sales and marketing spend and improved optimization of research and development investments. In addition, the Company announced a reorganization, including a reduction in workforce. This reorganization impacted approximately 110 employees, or approximately 6% of the Company’s global workforce. The Company recorded $6.4 million in total restructuring expenses, substantially all of which were severance and related costs, in the first quarter of 2017. The Company anticipates that it will substantially complete the reorganization by the end of the fourth quarter of 2017.

The restructuring reserve activities were as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Beginning balance
$
1,022

 
$
—

 
$
—

 
$
—

  Restructuring charges
—

 
—

 
6,375

 
—

  Cash paid
(359
)
 
—

 
(4,984
)
 
—

  Other - noncash
—

 
—

 
(728
)
 
—

Ending balance
$
663

 
$
—

 
$
663

 
$
—



Accumulated Other Comprehensive Income (Loss)

The components and activity of accumulated other comprehensive income (“AOCI”), net of tax, were as follows (in thousands):

 
Unrealized Gains (Losses) on Cash Flow Hedges
 
Currency Translation Adjustments
 
Unrealized Gains (Losses) on Available-for-Sale Investments
 
Total
 
 
 
 
 
 
 
 
Balance at December 31, 2016
$
(477
)
 
$
(314
)
 
$
(187
)
 
$
(978
)
Other comprehensive income (loss) before reclassifications
(20,582
)
 
314

 
133

 
(20,135
)
Amounts reclassified from AOCI
8,264

 
—

 
(12
)
 
8,252

Other comprehensive income (loss)
(12,318
)
 
314

 
121

 
(11,883
)
Balance at September 30, 2017
$
(12,795
)
 
$
—

 
$
(66
)
 
$
(12,861
)
Long-Term Debt
Long-Term Debt
Long-Term Debt
 

2015 Credit Agreement
 
In December 2015, the Company entered into a second amended and restated credit agreement (the “Senior Facility”) that allowed the Company to borrow up to $250.0 million, including up to $50.0 million for the issuance of letters of credit and up to $25.0 million for swing line loans. As of September 30, 2017, there were no outstanding borrowings under the Senior Facility. As of September 30, 2017, the Company had outstanding letters of credit totaling $38.3 million, issued to cover various security deposits on its facility leases.

On May 3, 2017, the Company entered into a first amendment to the Senior Facility (the “First Amendment”), pursuant to which the aggregate amount the Company can borrow under the Senior Facility was reduced from $250.0 million to $100.0 million, with up to $50.0 million available for the issuance of letters of credit and up to $25.0 million available for swing line loans. In addition, pursuant to the First Amendment, the applicable margin in respect of the interest rates under the Senior Facility were amended to be based on the Company’s level of liquidity (defined as the sum of the Company’s aggregate cash holdings and the amount available under its revolving commitments) and range from, with respect to Alternate Base Rate loans, 0.5% to 1.0%, and, with respect to LIBOR loans, 1.5% to 2.0%. Among other changes, the First Amendment also removed the fixed charge coverage ratio covenant and the consolidated leverage ratio covenant, and added a general liquidity covenant requiring the Company to maintain liquidity of at least $200.0 million in unrestricted cash, of which $100.0 million in cash or cash equivalents must be held in accounts subject to control agreements with, and maintained by, Silicon Valley Bank or its affiliates. The Company was in compliance with the financial covenants under the Senior Facility as of September 30, 2017.

Letters of Credit
 
As of September 30, 2017 and December 31, 2016, the Company had outstanding letters of credit totaling $38.3 million and $38.0 million, respectively, issued to cover various security deposits on the Company’s facility leases.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
 
Leases
 
The Company’s principal facility is located in San Francisco, California. The Company also leases office space in various locations with expiration dates between 2017 and 2024. The lease agreements often include leasehold improvement incentives, escalating lease payments, renewal provisions and other provisions which require the Company to pay taxes, insurance, maintenance costs or defined rent increases. All of Company’s leases are accounted for as operating leases. Future minimum payments under the Company’s noncancelable lease agreements as of September 30, 2017 were as follow (in thousands):

 
Total
Remaining 2017
$
9,244

2018
40,767

2019
46,623

2020
42,860

2021
41,296

Thereafter
100,317

Total future minimum lease payments
$
281,107



 
Legal Proceedings

Jawbone. On May 27, 2015, Aliphcom, Inc. d/b/a Jawbone (“Jawbone”) filed a lawsuit in the Superior Court of California in the County of San Francisco against the Company and certain of its employees who were formerly employed by Jawbone, alleging trade secret misappropriation and unfair and unlawful business practices against all defendants, and alleging breach of contract and breach of implied covenant of good faith and fair dealing against the employee defendants. The complaint seeks unspecified damages, including punitive damages and injunctive relief. On June 23, 2016, Jawbone filed a Second Amended Complaint, adding an additional employee defendant and related allegations. The trial is currently scheduled for April 30, 2018.
On June 10, 2015, Jawbone and BodyMedia, Inc., a wholly-owned subsidiary of Jawbone (“BodyMedia”), filed a lawsuit against the Company in the U.S. District Court for the Northern District of California alleging that the Company infringes certain U.S. patents. The complaint seeks unspecified compensatory damages and attorneys’ fees from the Company and to permanently enjoin the Company from making, manufacturing, using, selling, importing, or offering the Company’s products for sale. The lawsuit has been stayed pending resolution of the investigation in the U.S. International Trade Commission (the “ITC”).
On July 7, 2015, Jawbone and BodyMedia filed a complaint with the ITC requesting an investigation into purported violations of the Tariff Act of 1930 by the Company and Flextronics International Ltd. and Flextronics Sales and Marketing (A-P) Ltd. The complaint makes the same patent infringement and trade secret misappropriation claims as the two earlier cases. The complaint seeks a limited exclusion order and a cease and desist order halting the importation and sale of the infringing products. The ITC instituted the investigation on August 17, 2015. As a result of motions, all of the patent infringement claims were dismissed from the case. A trial on the trade secrets allegations took place from May 9 to May 17, 2016. On August 23, 2016, the administrative law judge concluded that the Company did not misappropriate any Jawbone trade secrets. On October 20, 2016, the ITC terminated the investigation in the ITC. Jawbone has appealed the dismissal of the patent infringement claims to the Federal Circuit. Oral argument has been scheduled for November 9, 2017.
On September 3, 2015, the Company filed a complaint for patent infringement against Jawbone in the U.S. District Court for the District of Delaware, asserting that Jawbone’s activity trackers infringe certain U.S. patents. This case has been transferred to the U.S. District Court for the Northern District of California. The trial is currently scheduled for July 13, 2020. On September 8, 2015, the Company filed a complaint for patent infringement against Jawbone in the U.S. District Court for the Northern District of California, asserting that Jawbone’s activity trackers infringe certain U.S. patents. No trial date has been set. On October 29, 2015, the Company filed a complaint for patent infringement against Jawbone in the U.S. District Court for the District of Delaware, asserting that Jawbone’s activity trackers infringe certain U.S. patents. That case has also been transferred to the U.S. District Court for the Northern District of California. No trial date has been set.
On November 2, 2015, the Company filed a complaint with the ITC requesting an investigation into violations of the Tariff Act of 1930 by Jawbone and Body Media. The complaint asserts that Jawbone’s products infringe certain U.S. patents. The complaint seeks a limited exclusion order and a cease and desist order halting the importation and sale of infringing products. The ITC instituted the investigation on December 1, 2015. On December 23, 2016, the Company filed a motion to terminate the investigation, and the ITC terminated the investigation on February 1, 2017.
On August 12, 2016, the Company was notified by Jawbone that Jawbone had received a confidential subpoena from the U.S. Attorney’s Office for the Northern District of California requesting certain of the Company’s confidential business information that appeared to be related to Jawbone’s allegations of trade secret misappropriation. On February 17, 2017, the Company received a subpoena from the same office. The Company is cooperating with the U.S. Attorney’s Office.
The Company intends to vigorously defend and prosecute each of the Jawbone litigation matters and, based on its review, the Company believes it has valid defenses and claims with respect to each of these matters. However, litigation is inherently uncertain, and any judgment or injunctive relief entered against the Company or any adverse settlement could materially and adversely impact its business, financial condition, operating results, and prospects. Regarding the Jawbone-related legal proceedings, because the outstanding matters are still in the early stages of litigation, the Company is unable to estimate a reasonably possible loss or range of loss, if any, that may result from these matters. In addition, these litigation matters are complex, likely to involve significant management time and attention, and the cost of defending and prosecuting these matters is likely to be expensive, regardless of outcome.
Sleep Tracking. On May 8, 2015, a purported class action lawsuit was filed against the Company in the U.S. District Court for the Northern District of California, alleging that the sleep tracking function available in certain trackers does not perform as advertised. Plaintiffs seek class certification, restitution, an award of unspecified compensatory and punitive damages, an award of reasonable costs and expenses, including attorneys’ fees, and other further relief as the Court may deem just and proper. On January 31, 2017, plaintiffs filed a motion for class certification. A ruling on this matter has not yet issued. On April 20, 2017, the Company filed a motion for summary judgment. The hearing on this motion was held on August 31, 2017. All other dates, including the prior trial date of July 10, 2017, have been vacated.

The Company believes that the plaintiffs’ allegations are without merit, and intends to vigorously defend against the claims. Because the Company is in the early stages of this litigation matter, the Company is unable to estimate a reasonably possible loss or range of loss, if any, that may result from this matter.

Heart Rate Tracking. On January 6, 2016 and February 16, 2016, two purported class action lawsuits were filed against the Company in the U.S. District Court for the Northern District of California, alleging that the PurePulse® heart rate tracking technology does not consistently and accurately record users’ heart rates. Plaintiffs allege common law claims as well as violations of various states’ false advertising and unfair competition statutes, and seek class certification, injunctive and declaratory relief, restitution, an award of unspecified compensatory damages, exemplary damages, punitive damages, and statutory penalties and damages, an award of reasonable costs and expenses, including attorneys’ fees, and other further relief as the Court may deem just and proper. On April 15, 2016, the plaintiffs filed a Consolidated Master Class Action Complaint and, on May 19, 2016, filed an Amended Consolidated Master Class Action Complaint. On January 9, 2017, the Company filed a motion to compel arbitration. On October 11, 2017, the Court granted the motion to compel arbitration.
The Company believes that the plaintiffs’ allegations are without merit, and intends to vigorously defend against the claims. Because the Company is in the early stages of this litigation matter, the Company is unable to estimate a reasonably possible loss or range of loss, if any, that may result from this matter.
Securities Litigation. On January 11, 2016, a putative securities class action was filed in the U.S. District Court for the Northern District of California naming as defendants the Company, certain of its officers and directors, and the underwriters of the Company’s initial public offering (the “IPO”). On May 10, 2016, the Court appointed the Fitbit Investor Group (consisting of five individual investors) as lead plaintiff, and an Amended Complaint was filed on July 1, 2016. Plaintiffs allege violations of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended, based on alleged materially false and misleading statements about the Company’s products between October 27, 2014 and November 23, 2015. Plaintiffs seek to represent a class of persons who purchased or otherwise acquired the Company’s securities (i) on the open market between June 18, 2015 and May 19, 2016; and/or (ii) pursuant to or traceable to the IPO. Plaintiffs seek class certification, an award of unspecified compensatory damages, an award of reasonable costs and expenses, including attorneys’ fees, and other further relief as the Court may deem just and proper.
On April 28, 2016, a putative class action lawsuit alleging violations of the Securities Act was filed in the Superior Court of California, County of San Mateo, naming as defendants the Company, certain of its officers and directors, the underwriters of the IPO, and a number of its investors. Plaintiffs allege that the IPO registration statement contained material misstatements about the Company’s products. Plaintiffs seek to represent a class of persons who purchased the Company’s common stock in and/or traceable to the IPO and/or the November 2015 follow-on public offering (the “Secondary Offering”). Plaintiffs seek class certification, an award of unspecified compensatory damages, an award of reasonable costs and expenses, including attorneys’ fees, and other further relief as the Court may deem just and proper. On May 17, 2016, a similar class action lawsuit was filed in the Superior Court of California, County of San Francisco. The cases have now been consolidated in the County of San Francisco. On April 7, 2017, the Court granted a motion to dismiss the Section 11 claim based on the Secondary Offering and stayed the cases.
On November 11, 2016, a derivative lawsuit was filed in the U.S. District Court for the Northern District of California derivatively on behalf of the Company naming as defendants certain of its officers and directors and as a nominal defendant the Company. Plaintiffs allege breach of fiduciary duty based on the same set of alleged facts in the federal and state securities class action litigation. On February 3, 2017, a second derivative lawsuit was filed in the U.S. District Court for the District of Delaware on the same allegations. Both Courts have ordered a stay in these two cases.
On June 1, 2017 and June 9, 2017, two additional derivative complaints were filed in the Delaware Court of Chancery. Plaintiffs allege breach of fiduciary duty misappropriation of information against certain defendants who sold shares in the IPO and/or the Secondary Offering. On June 27, 2017, a fifth derivative lawsuit was filed in the U.S. District Court for the Northern District of California on the same allegations.
On June 27, 2017, an individual investor lawsuit alleging violations of the Securities Act and state law claims for statutory fraud and unfair business practice was filed in the Superior Court of California, County of Alameda, naming as defendants the Company and certain of its officers. The allegations are based on the same set of alleged facts in the federal and state securities class action litigation.
The Company believes that the plaintiffs’ allegations in these actions are without merit, and intends to vigorously defend against the claims. Because the Company is in the early stages of these litigation matters, the Company is unable to estimate a reasonably possible loss or range of loss, if any, that may result from these matters.
Other. The Company is and, from time to time, may in the future become, involved in other legal proceedings in the ordinary course of business. The Company currently believes that the outcome of any of these existing legal proceedings, including the aforementioned cases, either individually or in the aggregate, will not have a material impact on the operating results, financial condition or cash flows of the Company. With respect to existing legal proceedings, the Company has either determined that the existence of a material loss is not reasonably possible or that it is unable to estimate a reasonably possible loss or range of loss. The Company may incur substantial legal fees, which are expensed as incurred, in defending against these legal proceedings.
Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. To date, the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company also currently has directors’ and officers’ insurance.
Stockholders' Equity
Stockholders' Equity
Stockholders’ Equity
 
Stock Option Exchange

On April 13, 2017, the Company filed its definitive proxy statement, submitting to stockholders a proposal for a stock option exchange program (the “Program”). The Program would allow the Company employees, including its executive officers other than its President, Chief Executive Officer, and Chairman, Chief Technology Officer, and Chief Financial Officer (“Eligible Employees”), to exchange out-of-the-money or “underwater” options to purchase shares of the Company’s Class A common stock or Class B common stock currently held by such Eligible Employees for a lesser number of restricted stock units (“RSUs”) that may be settled for shares of its Class A common stock, (“New RSUs”), under the Company’s 2015 Equity Incentive Plan (the “2015 Plan”). Each New RSU represents an unfunded right to receive one share of the Company’s Class A common stock on a date in the future, which generally is the date on which the New RSU will vest. Eligible Employees participating in the Program would receive one New RSU for every two “out-of-the-money” options that they exchange. The New RSUs would generally vest over the remaining vesting period of the exchanged option (subject to a one-year minimum vesting period). None of the members of the Company’s board of directors were eligible to participate in the Program. On May 25, 2017, the Company’s stockholders approved the Program at the 2017 Annual Meeting of Stockholders. The Company subsequently commenced the Program by filing a tender offer statement on Schedule TO with the SEC on June 21, 2017. The Program expired on July 19, 2017. A total of 3.7 million “underwater” stock options were tendered by the Eligible Employees, representing approximately 85% of the stock options eligible for exchange. On July 20, 2017, the Company granted an aggregate of 1.8 million New RSUs under the 2015 Plan in exchange for the “underwater” stock options tendered. The completion of the Program resulted in total incremental unrecognized stock-based compensation expense of $8.5 million, to be recognized over the greater of one year or the remaining vesting service period of the tendered stock options.

Equity Incentive Plans

In May 2015, the Company’s board of directors and stockholders adopted and approved the 2015 Plan. The 2015 Plan became effective on June 16, 2015 and serves as the successor to the Amended and Restated 2007 Stock Plan (the “2007 Plan”). The Company ceased granting awards under the 2007 Plan, and any outstanding stock options and RSUs granted under the 2007 Plan would remain subject to the terms of the 2007 Plan. As of September 30, 2017, 14.8 million shares of Class A common stock were reserved and available for future issuance under the 2015 Plan.

Stock Options
 
Stock option activity under the equity incentive plans was as follows:
 
Stock Options Outstanding
 
Number of
Shares Subject
to
Stock Options
 
Weighted–
Average
Exercise
Price
 
Aggregate
Intrinsic
Value (1)
 
(in thousands)
 
 
 
(in thousands)
Balance—December 31, 2016
34,454

 
$
3.85

 
 
Granted
1,150

 
5.63

 
 
Exercised
(6,634
)
 
1.15

 


Forfeited or canceled
(6,775
)
 
9.59

 
 
Balance—September 30, 2017
22,195

 
2.99

 
$
93,199

 
 
 
 
 
 
Stock options exercisable—September 30, 2017
16,455

 
2.42

 
77,220

Stock options vested and expected to vest—September 30, 2017
22,084

 
2.99

 
92,872


 
(1) The aggregate intrinsic values of stock options outstanding, exercisable, vested and expected to vest as of September 30, 2017 were calculated as the difference between the exercise price of the stock options and the fair value of the Class A common stock of $6.96 as of September 30, 2017.

 Restricted Stock Units
 
RSU activity under the equity incentive plans was as follows:
 
RSUs
Outstanding
 
Weighted-
Average
Grant Date
Fair Value
 
(in thousands)
 
 
Unvested balance—December 31, 2016
11,578

 
$
16.85

Granted
14,499

 
6.55

Vested
(4,673
)
 
12.81

Forfeited or canceled
(3,909
)
 
12.94

Unvested balance—September 30, 2017
17,495

 
10.27


 

Employee Stock Purchase Plan

In May 2015, the Company’s board of directors adopted the 2015 Employee Stock Purchase Plan (the “2015 ESPP”), which became effective on June 17, 2015. A total of 3.8 million shares of Class A common stock were initially reserved for issuance under the 2015 ESPP. The 2015 ESPP allows eligible employees to purchase shares of the Company’s Class A common stock through payroll deductions at a price per share equal to 85% of the lesser of the fair market value of the Company’s Class A common stock (i) on the first trading day of the applicable offering period and (2) the last trading day of each purchase period in the applicable offering period. Except for the initial offering period, the 2015 ESPP provides for 6-month offering periods beginning in May and November of each year. The initial offering period began June 17, 2015 and ended in May 2016.

Warrant

On July 10, 2017, the Company issued a warrant to purchase 0.5 million shares of Class A common stock. The warrant is exercisable based on service and performance-based conditions and has an exercise price of $5.23 per share and a contractual term of ten years. As of September 30, 2017, 0.5 million warrants were outstanding.

Stock-Based Compensation Expense
 
Total stock-based compensation expense recognized was as follows (in thousands):
 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Cost of revenue
$
1,379

 
$
1,014

 
$
2,889

 
$
3,407

Research and development
12,947

 
12,314

 
40,280

 
34,432

Sales and marketing
3,679

 
3,030

 
11,301

 
8,492

General and administrative
4,792

 
3,647

 
12,786

 
11,844

Total stock-based compensation expense
$
22,797

 
$
20,005

 
$
67,256

 
$
58,175


 
As of September 30, 2017, the total unrecognized stock-based compensation expense related to unvested stock options and RSUs was $179.9 million, which the Company expects to recognize over an estimated weighted average period of 2.2 years.
Income Taxes
Income Taxes
Income Taxes
  
The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax.

For the three and nine months ended September 30, 2017, the Company recorded an expense for income taxes of $86.2 million and $51.9 million, respectively, for an effective tax rate of (317.3)% and (28.8)%, respectively. The effective tax rate for the nine months ended September 30, 2017 was different than the statutory federal tax rate primarily due to the impact of a valuation allowance recorded against U.S. deferred tax assets, and the mix of income between United States and foreign jurisdictions.

The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. The realization of deferred tax assets is primarily dependent on us generating sufficient U.S. and foreign taxable income in future fiscal years. In addition to considering forecasts of future taxable income, the Company is also required to evaluate and quantify other possible sources of taxable income in order to assess the realization of its deferred tax assets, namely the reversal of existing deferred tax liabilities, the carry back of losses and credits as allowed under current tax law, and the implementation of tax planning strategies.

In evaluating the need for a valuation allowance, and determining that a valuation allowance was appropriate in the period, the Company considered its recent trend of losses and the fact that it has had four consecutive quarters of losses. In addition, the Company took into account in the period the fact that there was greater clarity following another quarter of results than was available in earlier periods. During the nine month period ended September 30, 2017, the Company recorded a $111.4 million valuation allowance against a portion of its U.S. deferred tax assets as it determined, within the period, it would not meet the more likely than not threshold.  The Company believes that a portion of its deferred tax assets will be realized through the carryback of losses and credits. Accordingly, a valuation allowance is only recorded against the excess deferred tax assets that will not be realized. As of September 30, 2017, the Company has recognized a tax receivable of approximately $75.0 million related to the anticipated carryback of losses incurred in the current year to prior taxable periods. The Company has also recognized U.S. net deferred tax assets, after the valuation allowance, of $41.9 million as of September 30, 2017 related to future deductions that will again result in additional loss carrybacks and corresponding refunds of prior taxes paid. The Company will continue to assess the realizability of the deferred tax assets in each of the applicable jurisdictions going forward and adjust the valuation allowance accordingly.

For the three and nine months ended October 1, 2016, the Company recorded an expense for income taxes of $18.3 million and $31.9 million, respectively, for an effective tax rate of 41.2% and 42.3%, respectively. The effective tax rate for the nine months ended October 1, 2016 was higher than the statutory federal tax rate primarily due to the effect of an out-of-period adjustment recorded in the three months ended April 2, 2016, the mix of income between the United States and foreign jurisdictions, unrecognized tax benefits, and a permanent domestic production activities deduction.

As of September 30, 2017, the total amount of gross unrecognized tax benefits on our condensed consolidated balance sheet was $37.0 million, of which $28.5 million would affect the effective tax rate if recognized. The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of non-current assets and liabilities. The Company believes that within the next 12 months, it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Given the uncertainties described above, the Company can only determine a range of estimated potential decreases in underlying unrecognized tax benefits ranging from $0 to approximately $5.5 million.
Net Income (Loss) per Share
Net Income (Loss) per Share
Net Income (Loss) per Share
 
The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share (in thousands, except per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
Numerator:
 
 
 
 
 
 
 
Net income (loss)
$
(113,403
)
 
$
26,120

 
$
(231,722
)
 
$
43,496

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted-average shares of common stock—basic for Class A and Class B
234,242

 
222,412

 
230,918

 
219,079

Effect of dilutive securities
—

 
21,275

 
—

 
23,573

Weighted-average shares of common stock—diluted for Class A and Class B
234,242

 
243,687

 
230,918

 
242,652

Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$
(0.48
)
 
$
0.12

 
$
(1.00
)
 
$
0.20

Diluted
$
(0.48
)
 
$
0.11

 
$
(1.00
)
 
$
0.18



The following potentially dilutive common shares were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been anti-dilutive (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Stock options to purchase common stock
14,768

 
3,553

 
18,874

 
3,549

RSUs
9,791

 
3,063

 
10,235

 
3,611

Warrants
411

 
—

 
137

 
—

Diluted impact of ESPP
73

 
—

 
125

 
—

Diluted common stock subject to vesting
100

 
—

 
113

 
—

Total
25,143

 
6,616

 
29,484

 
7,160

Significant Customer Information and Other Information
Significant Customer Information and Other Information
Significant Customer Information and Other Information
 
Retailer and Distributor Concentration
 
As described in Note 1 above, Wynit filed for bankruptcy protection in September 2017. Wynit was the Company’s largest customer prior to its bankruptcy filing, representing 11% of total revenue during the six months ended July 1, 2017 and 19% of total accounts receivables as of July 1, 2017.

Retailers and distributors with revenue equal to or greater than 10% of total revenue for the three and nine months ended September 30, 2017 and October 1, 2016 were as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
A
17
%
 
14
%
 
14
%
 
14
%
B
12

 
*

 
*

 
*

C
*

 
13

 
*

 
12

D
*

 
10

 
*

 
15

* Represents less than 10%.

Retailers and distributors that accounted for equal to or greater than 10% of accounts receivable at September 30, 2017 and December 31, 2016 were as follows:
 
September 30,
2017
 
December 31,
2016
 
 
 
 
 
 
A
17
%
 
19
%
B
16

 
*

C
10

 
*

D
*

 
16

E
*

 
12

 
* Represents less than 10%.

Geographic and Other Information
 
Revenue by geographic region, based on ship-to destinations, was as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
United States
$
244,204

 
$
361,239

 
$
613,825

 
$
1,158,116

Americas excluding United States
25,276

 
25,939

 
69,656

 
76,708

Europe, Middle East, and Africa
88,672

 
80,932

 
285,045

 
255,127

APAC
34,370

 
35,692

 
76,237

 
105,735

Total
$
392,522

 
$
503,802

 
$
1,044,763

 
$
1,595,686


 
As of September 30, 2017 and December 31, 2016, long-lived assets, which represent property and equipment, located outside the United States were $26.7 million and $30.1 million, respectively.
Acquisitions
Acquisitions
Acquisitions

2016 Acquisitions

In December 2016, the Company completed a purchase of certain assets from Pebble Industries, Inc., a privately-held company (“Pebble”), which was accounted for as a business combination, for total cash consideration of $23.4 million, of which $9.6 million was allocated to developed technology intangible assets, $14.4 million to goodwill, and $0.6 million to assumed liabilities. Approximately $3.5 million of the consideration payable to Pebble was held as partial security for certain indemnification obligations, and will be held back for payment until March 2018. The acquisition is expected to enhance the features and functionality of the Company’s devices. The amortization period of the acquired developed technology is approximately 5 years. Goodwill is deductible for tax purposes.

In December 2016, the Company completed a purchase of certain assets from Vector Watch S.R.L., a privately-held company (“Vector Watch”), which was accounted for as a business combination, for total cash consideration of $15.0 million, of which $3.9 million was allocated to developed technology intangible assets, $11.4 million to goodwill, and $0.3 million to assumed liabilities. Approximately $2.3 million of the consideration payable to Vector Watch was held as partial security for certain indemnification obligations, and will be held back for payment until December 2018. The acquisition is expected to enhance the features and functionality of the Company’s devices. The amortization period of the acquired developed technology is approximately 2.5 years. Goodwill is deductible for tax purposes.

In May 2016, the Company completed a purchase of certain assets from Coin, Inc., a privately-held company, which was accounted for as a business combination, for total cash consideration of $7.0 million, of which $3.9 million was allocated to in-process research and development intangible assets, and $3.1 million to goodwill. The acquisition is expected to enhance the features and functionality of the Company’s devices. In-process research and development is not amortized until the completion or abandonment of the related development. Goodwill is deductible for tax purposes.
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
Basis of Presentation and Summary of Significant Accounting Policies 
The accompanying condensed consolidated financial statements of Fitbit, Inc. (the “Company”) are unaudited. The condensed consolidated balance sheet at December 31, 2016 has been derived from the audited financial statements of the Company. The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information, and in management’s opinion, includes all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position, its results of operations, and cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full fiscal year or any other period.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the Securities and Exchange Commission (“SEC”) on March 1, 2017.

The Company’s fiscal year ends on December 31 of each year. The Company is on a 4-4-5 week quarterly calendar. There were 91 days in each of the three months ended September 30, 2017 and October 1, 2016, and 273 and 275 days in the nine months ended September 30, 2017 and October 1, 2016, respectively.
Principles of Consolidation 
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.
Use of Estimates 
Use of Estimates
 
The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. The primary estimates and assumptions made by management are related to revenue recognition, reserves for sales returns and incentives, reserves for warranty, valuation of stock options, fair value of derivative assets and liabilities, allowance for doubtful accounts, inventory valuation, fair value of goodwill and acquired tangible and intangible assets and liabilities assumed during acquisitions, the number of reporting segments, the recoverability of intangible assets and their useful lives, contingencies, and the valuations of deferred income tax assets and uncertain tax positions. Actual results could differ from those estimates, and such differences may be material to the condensed consolidated financial statements.
Recent Accounting Pronouncements 
Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (the “FASB”), issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which affects any entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the currently effective guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 will become effective for the Company on January 1, 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. In April 2016, the FASB issued ASU 2016-10, which clarifies guidance on identifying performance obligations and licensing implementation. The Company currently expects to adopt the new revenue recognition standard as of January 1, 2018, utilizing the modified retrospective transition method. The Company’s implementation team has made progress in its project plan, which includes evaluating customer contracts across the organization, developing policies, processes and tools to report financial results, and implementing and evaluating the Company’s internal controls over financial reporting that will be necessary under the new standard. Although the new standard may, in certain circumstances, impact the timing of when revenue is recognized for products shipped, and the timing and classification of certain sales incentives, which are expected to generally be recognized earlier than under existing guidance, the Company believes the new guidance is materially consistent with its current revenue recognition policy. In addition, the Company has determined that the presentation of certain reserve balances currently shown net within accounts receivable will be presented as refund liabilities within current liabilities upon adoption. The Company does not currently expect the adoption to have a material impact on its consolidated financial statements. The Company is continuing to make progress in evaluating the impact of the adoption and preliminary assessments are subject to change.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize right-of-use assets and lease liabilities for operating leases, initially measured at the present value of the lease payments, on the balance sheet. ASU 2016-02 will become effective for the Company on January 1, 2019, and requires adoption using a modified retrospective approach. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. The Company anticipates that the adoption will have a material impact on its consolidated balance sheets, as it will now include a right of use asset and a lease liability for the obligation to make lease payments related to substantially all operating lease arrangements; however, the Company does not expect the adoption to have a material impact on its consolidated statements of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable and available for sale debt securities. ASU 2016-13 will become effective for the Company on January 1, 2020 and early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 provides guidance intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 will become effective for the Company on January 1, 2018 and early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. The second step measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-04, a company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 was issued to clarify and reduce both (i) diversity in practice and (ii) cost and complexity when applying the guidance in Topic 718 to a change to the terms and conditions of a share-based payment award. ASU 2017-09 will become effective for the Company on January 1, 2018 with early adoption permitted. The amendments to ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 amends the hedge accounting rules to simplify the application of hedge accounting guidance and better portray the economic results of risk management activities in the financial statements. The guidance expands the ability to hedge non-financial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. ASU 2017-12 will become effective for the Company on January 1, 2019 with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
 
    
Accounting Pronouncements Recently Adopted

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Upon adoption, ASU 2016-09 requires that excess tax benefits for share-based payments be recorded as a reduction of income tax expense and reflected within operating cash flows, rather than being recorded within equity and reflected within financing cash flows. ASU 2016-09 also permits the repurchase of more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company’s cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. ASU 2016-09 became effective for the Company on January 1, 2017. The adoption of ASU 2016-09 resulted in a cumulative effect adjustment of $4.9 million to increase retained earnings as of January 1, 2017, related to the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The Company elected to apply the change in presentation of excess tax benefits in the condensed consolidated statement of cash flows retrospectively, which resulted in an increase in net cash provided by operations and a decrease in net cash provided by financing activities of $25.5 million for the nine months ended October 1, 2016.  The Company also elected to make an accounting policy change to recognize forfeitures starting on January 1, 2017 on a prospective basis.
Fair Value Measurements (Tables)
Schedule of fair value of assets and liabilities measured on recurring basis
The following tables set forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
 
 
September 30, 2017
 
Level 1
 
Level 2
 
Total
 
 
 
 
 
 
Assets:
 
 
 
 
 
Money market funds
$
129,790

 
$
—

 
$
129,790

U.S. government agencies
—

 
50,707

 
50,707

Corporate debt securities
—

 
375,891

 
375,891

Derivative assets
—

 
1,307

 
1,307

Total
$
129,790

 
$
427,905

 
$
557,695

Liabilities:
 
 
 
 
 
Derivative liabilities
$
—

 
$
11,826

 
$
11,826


 
December 31, 2016
 
Level 1
 
Level 2
 
Total
 
 
 
 
 
 
Assets:
 
 
 
 
 
Money market funds
$
50,125

 
$
—

 
$
50,125

U.S. government agencies
—

 
86,526

 
86,526

Corporate debt securities
—

 
390,286

 
390,286

Derivative assets
—

 
10,625

 
10,625

Total
$
50,125

 
$
487,437

 
$
537,562

Liabilities:
 
 
 
 
 
Derivative liabilities
$
—

 
$
3,780

 
$
3,780

Financial Instruments (Tables)
Schedule of available for sale securities including fair value and gross unrealized losses 
The following table classifies marketable securities by contractual maturities (in thousands):
 
September 30, 2017
 
December 31, 2016
 
 
 
 
Due in one year
$
364,734

 
$
355,152

Due in one to two years
13,814

 
49,541

Total
$
378,548

 
$
404,693

The following table sets forth cash, cash equivalents and marketable securities as of September 30, 2017 (in thousands):
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Cash and Cash Equivalents
 
Marketable Securities
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
102,841

 
$
—

 
$
—

 
$
102,841

 
$
102,841

 
$
—

Money market funds
129,790

 
—

 
—

 
129,790

 
129,790

 
—

U.S. government agencies
50,703

 
4

 
—

 
50,707

 
25,795

 
24,912

Corporate debt securities
375,959

 
50

 
(118
)
 
375,891

 
22,255

 
353,636

Total
$
659,293

 
$
54

 
$
(118
)
 
$
659,229

 
$
280,681

 
$
378,548


The following table sets forth cash, cash equivalents and marketable securities as of December 31, 2016 (in thousands):
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Cash and Cash Equivalents
 
Marketable Securities
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
179,076

 
$
—

 
$
—

 
$
179,076

 
$
179,076

 
$
—

Money market funds
50,125

 
—

 
—

 
50,125

 
50,125

 
—

U.S. government agencies
86,533

 
8

 
(15
)
 
86,526

 
—

 
86,526

Corporate debt securities
390,466

 
24

 
(204
)
 
390,286

 
72,119

 
318,167

Total
$
706,200

 
$
32

 
$
(219
)
 
$
706,013

 
$
301,320

 
$
404,693

Schedule of derivative instruments in statement of financial position, fair value 
The following table presents the fair value of the Company’s foreign currency derivative contracts as of the periods presented (in thousands):
 
 
 
September 30, 2017
 
December 31, 2016
 
Balance Sheet Location
 
Fair Value Derivative
Assets
 
Fair Value Derivative Liabilities
 
Fair Value Derivative
Assets
 
Fair Value Derivative Liabilities
 
 
 
 
 
 
 
 
 
 
Cash flow designated hedges
Prepaid expenses and other current assets
 
$
—

 
$
—

 
$
813

 
$
—

Cash flow designated hedges
Accrued liabilities
 
—

 
11,826

 
—

 
1,428

Hedges not designated
Prepaid expenses and other current assets
 
1,307

 
—

 
9,812

 
—

Hedges not designated
Accrued liabilities
 
—

 
—

 
—

 
2,352

Total fair value of derivative instruments
 
 
$
1,307

 
$
11,826

 
$
10,625

 
$
3,780

Schedule of cash flow hedging instruments, statement of operations 
The following table presents the pre-tax impact of the Company’s foreign currency derivative contracts on other comprehensive income (“OCI”) and the condensed consolidated statements of operations for the periods presented (in thousands):
 
 
 
Three Months Ended
 
Nine Months Ended
 
Income Statement Location
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
 
 
Foreign exchange cash flow hedges:
 
 
 
 
 
 
 
 
 
Gain (loss) recognized in OCI – effective portion
 
 
$
(6,603
)
 
$
(560
)
 
$
(20,590
)
 
$
975

Gain (loss) reclassified from OCI into income – effective portion
Revenue
 
(6,617
)
 
3,060

 
(6,897
)
 
1,511

Gain (loss) reclassified from OCI into income – effective portion
Operating expenses
 
—

 
(65
)
 
(1,405
)
 
2,343

Gain (loss) recognized in income – ineffective portion
Other income (expense), net
 
—

 
76

 
21

 
(109
)
 
 
 
 
 
 
 
 
 
 
Gain recognized in income – excluded time value portion
Other income (expense), net
 
672

 
—

 
1,516

 
—

 
 
 
 
 
 
 
 
 
 
Foreign exchange balance sheet hedges:
 
 
 
 
 
 
 
 
 
Gain (loss) recognized in income
Other income (expense), net
 
(2,062
)
 
(477
)
 
(8,838
)
 
3,567

Schedule of cash flow hedging instruments, comprehensive income 
The following table presents the pre-tax impact of the Company’s foreign currency derivative contracts on other comprehensive income (“OCI”) and the condensed consolidated statements of operations for the periods presented (in thousands):
 
 
 
Three Months Ended
 
Nine Months Ended
 
Income Statement Location
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
 
 
Foreign exchange cash flow hedges:
 
 
 
 
 
 
 
 
 
Gain (loss) recognized in OCI – effective portion
 
 
$
(6,603
)
 
$
(560
)
 
$
(20,590
)
 
$
975

Gain (loss) reclassified from OCI into income – effective portion
Revenue
 
(6,617
)
 
3,060

 
(6,897
)
 
1,511

Gain (loss) reclassified from OCI into income – effective portion
Operating expenses
 
—

 
(65
)
 
(1,405
)
 
2,343

Gain (loss) recognized in income – ineffective portion
Other income (expense), net
 
—

 
76

 
21

 
(109
)
 
 
 
 
 
 
 
 
 
 
Gain recognized in income – excluded time value portion
Other income (expense), net
 
672

 
—

 
1,516

 
—

 
 
 
 
 
 
 
 
 
 
Foreign exchange balance sheet hedges:
 
 
 
 
 
 
 
 
 
Gain (loss) recognized in income
Other income (expense), net
 
(2,062
)
 
(477
)
 
(8,838
)
 
3,567

Schedule of offsetting of foreign currency derivative contracts 
The following tables set forth the available offsetting of net derivative assets under the master netting arrangements as of September 30, 2017 and December 31, 2016 (in thousands):

 
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
 
Gross Amounts Not Offset in Condensed Consolidated Balance Sheets
September 30, 2017
Gross Amounts Recognized
 
Gross Amounts Offset
 
Net Amounts Presented
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts assets
$
1,307

 
$
—

 
$
1,307

 
$
1,307

 
$
—

 
$
—

Foreign exchange contracts liabilities
11,826

 
—

 
11,826

 
1,307

 
—

 
10,519

 
 
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
 
Gross Amounts Not Offset in Condensed Consolidated Balance Sheets
December 31, 2016
Gross Amounts Recognized
 
Gross Amounts Offset
 
Net Amounts Presented
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts assets
$
10,625

 
$
—

 
$
10,625

 
$
3,780

 
$
—

 
$
6,845

Foreign exchange contracts liabilities
3,780

 
—

 
3,780

 
3,780

 
—

 
—



Balance Sheet Components (Tables)
Schedule of accounts receivable reserves 
Revenue returns reserve activities were as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Beginning balances
$
51,520

 
$
80,277

 
$
98,851

 
$
74,045

Increases
146,356

 
46,654

 
236,267

 
166,205

Returns taken
(135,978
)
 
(59,763
)
 
(273,220
)
 
(173,082
)
Ending balances
$
61,898

 
$
67,168

 
$
61,898

 
$
67,168

Schedule of inventories 
Inventories consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
  
 
 
 
 
 
Components
$
9,072

 
$
1,035

Finished goods
129,709

 
229,352

Total inventories
$
138,781

 
$
230,387

Schedule of prepaid expenses and other current asset 
Prepaid expenses and other current assets consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
  
 
 
 
 
 
Income tax receivable
$
96,467

 
$
481

POP displays, net
16,189

 
22,804

Prepaid marketing
3,865

 
5,764

Derivative assets
1,307

 
10,625

Prepaid expenses
16,508

 
17,161

Insurance receivable
26,795

—

—

Other
12,523

 
9,511

Total prepaid expenses and other current assets
$
173,654

 
$
66,346

Schedule of property and equipment 
Property and equipment, net, consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
  
 
 
 
 
 
Tooling and manufacturing equipment
$
55,713

 
$
60,944

Furniture and office equipment
18,463

 
14,424

Purchased and internally-developed software
18,524

 
12,032

Leasehold improvements
45,867

 
28,489

Total property and equipment
138,567

 
115,889

Less: Accumulated depreciation and amortization
(47,744
)
 
(39,336
)
Property and equipment, net
$
90,823

 
$
76,553

Schedule of intangible assets (excluding goodwill) 
The carrying amounts of the intangible assets as of September 30, 2017 and December 31, 2016 were as follows (in thousands, except useful life). In-process research and development is not amortized until the completion or abandonment of the related development.
 
September 30, 2017
 
December 31, 2016
 
Weighted Average Remaining Useful Life
(years)
  
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed technology
$
26,648

 
$
(7,209
)
 
$
19,439

 
$
26,092

 
$
(3,247
)
 
$
22,845

 
4.7
Trademarks and other
1,278

 
(714
)
 
564

 
1,278

 
(542
)
 
736

 
1.2
Total finite-lived intangible assets subject to amortization, net
27,926

 
(7,923
)
 
20,003

 
27,370

 
(3,789
)
 
23,581

 
 
In-process research and development
3,940

 
—

 
3,940

 
3,940

 
—

 
3,940

 
 
Total intangible assets, net
$
31,866

 
$
(7,923
)
 
$
23,943

 
$
31,310

 
$
(3,789
)
 
$
27,521

 
 
Schedule of estimated future amortization expense 
The estimated future amortization expense of acquired finite-lived intangible assets to be charged to cost of revenue and operating expenses after September 30, 2017 is as follows (in thousands):
  
Cost of Revenue
 
Operating Expenses
 
Total
 
 
 
 
 
 
Remaining 2017
$
1,333

 
$
58

 
$
1,391

2018
5,332

 
230

 
5,562

2019
4,552

 
230

 
4,782

2020
3,772

 
46

 
3,818

2021
3,772

 
—

 
3,772

Thereafter
678

 
—

 
678

Total finite-lived intangible assets, net
$
19,439

 
$
564

 
$
20,003

Schedule of accrued liabilities 
Accrued liabilities consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
  
 
Product warranty
$
86,679

 
$
99,923

Accrued manufacturing expense and freight
43,045

 
75,579

Accrued sales incentives
66,237

 
74,181

Accrued sales and marketing
28,711

 
41,948

Accrued co-op advertising and marketing development funds
18,273

 
40,002

Sales taxes and VAT payable
17,098

 
8,891

Employee-related liabilities
28,484

 
13,934

Inventory received but not billed
5,663

 
7,363

Accrued legal fees
7,319

 
3,963

Derivative liabilities
11,826

 
3,780

Other
32,822

 
20,997

Accrued liabilities
$
346,157

 
$
390,561

Schedule of product warranty reserves 
Product warranty reserve activities were as follows (in thousands)(1):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Beginning balances
$
72,761

 
$
76,841

 
$
99,923

 
$
40,212

Charged to cost of revenue
26,825

 
47,042

 
44,167

 
148,494

Changes related to pre-existing warranties
5,669

 
(18,727
)
 
8,142

 
(19,214
)
Settlement of claims
(18,576
)
 
(42,215
)
 
(65,553
)
 
(106,551
)
Ending balances
$
86,679

 
$
62,941

 
$
86,679

 
$
62,941

 

(1) 
Does not include reserves established as a result of the recall of the Fitbit Force. See the section titled “—Fitbit Force Recall Reserve” in the Company’s Annual Report on Form 10-K for additional information regarding such reserves.
Schedule of product recall reserves 
The restructuring reserve activities were as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Beginning balance
$
1,022

 
$
—

 
$
—

 
$
—

  Restructuring charges
—

 
—

 
6,375

 
—

  Cash paid
(359
)
 
—

 
(4,984
)
 
—

  Other - noncash
—

 
—

 
(728
)
 
—

Ending balance
$
663

 
$
—

 
$
663

 
$
—

Schedule of accumulated other comprehensive income 
The components and activity of accumulated other comprehensive income (“AOCI”), net of tax, were as follows (in thousands):

 
Unrealized Gains (Losses) on Cash Flow Hedges
 
Currency Translation Adjustments
 
Unrealized Gains (Losses) on Available-for-Sale Investments
 
Total
 
 
 
 
 
 
 
 
Balance at December 31, 2016
$
(477
)
 
$
(314
)
 
$
(187
)
 
$
(978
)
Other comprehensive income (loss) before reclassifications
(20,582
)
 
314

 
133

 
(20,135
)
Amounts reclassified from AOCI
8,264

 
—

 
(12
)
 
8,252

Other comprehensive income (loss)
(12,318
)
 
314

 
121

 
(11,883
)
Balance at September 30, 2017
$
(12,795
)
 
$
—

 
$
(66
)
 
$
(12,861
)
Commitments and Contingencies (Tables)
Schedule of Future Minimum Rental Payments for Operating Leases
Future minimum payments under the Company’s noncancelable lease agreements as of September 30, 2017 were as follow (in thousands):

 
Total
Remaining 2017
$
9,244

2018
40,767

2019
46,623

2020
42,860

2021
41,296

Thereafter
100,317

Total future minimum lease payments
$
281,107

Stockholders' Equity (Tables)
Schedule of stock option activity 
Stock option activity under the equity incentive plans was as follows:
 
Stock Options Outstanding
 
Number of
Shares Subject
to
Stock Options
 
Weighted–
Average
Exercise
Price
 
Aggregate
Intrinsic
Value (1)
 
(in thousands)
 
 
 
(in thousands)
Balance—December 31, 2016
34,454

 
$
3.85

 
 
Granted
1,150

 
5.63

 
 
Exercised
(6,634
)
 
1.15

 


Forfeited or canceled
(6,775
)
 
9.59

 
 
Balance—September 30, 2017
22,195

 
2.99

 
$
93,199

 
 
 
 
 
 
Stock options exercisable—September 30, 2017
16,455

 
2.42

 
77,220

Stock options vested and expected to vest—September 30, 2017
22,084

 
2.99

 
92,872


 
(1) The aggregate intrinsic values of stock options outstanding, exercisable, vested and expected to vest as of September 30, 2017 were calculated as the difference between the exercise price of the stock options and the fair value of the Class A common stock of $6.96 as of September 30, 2017.
Schedule of restricted stock unit activity 
RSU activity under the equity incentive plans was as follows:
 
RSUs
Outstanding
 
Weighted-
Average
Grant Date
Fair Value
 
(in thousands)
 
 
Unvested balance—December 31, 2016
11,578

 
$
16.85

Granted
14,499

 
6.55

Vested
(4,673
)
 
12.81

Forfeited or canceled
(3,909
)
 
12.94

Unvested balance—September 30, 2017
17,495

 
10.27

Schedule of stock-based compensation expense 
Total stock-based compensation expense recognized was as follows (in thousands):
 
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Cost of revenue
$
1,379

 
$
1,014

 
$
2,889

 
$
3,407

Research and development
12,947

 
12,314

 
40,280

 
34,432

Sales and marketing
3,679

 
3,030

 
11,301

 
8,492

General and administrative
4,792

 
3,647

 
12,786

 
11,844

Total stock-based compensation expense
$
22,797

 
$
20,005

 
$
67,256

 
$
58,175

Net Income (Loss) per Share (Tables)
Schedule of basic and diluted net income (loss) per share 
The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share (in thousands, except per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
Numerator:
 
 
 
 
 
 
 
Net income (loss)
$
(113,403
)
 
$
26,120

 
$
(231,722
)
 
$
43,496

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted-average shares of common stock—basic for Class A and Class B
234,242

 
222,412

 
230,918

 
219,079

Effect of dilutive securities
—

 
21,275

 
—

 
23,573

Weighted-average shares of common stock—diluted for Class A and Class B
234,242

 
243,687

 
230,918

 
242,652

Net income (loss) per share:
 
 
 
 
 
 
 
Basic
$
(0.48
)
 
$
0.12

 
$
(1.00
)
 
$
0.20

Diluted
$
(0.48
)
 
$
0.11

 
$
(1.00
)
 
$
0.18

Schedule of antidilutive securities excluded from earnings per share 
The following potentially dilutive common shares were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been anti-dilutive (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
Stock options to purchase common stock
14,768

 
3,553

 
18,874

 
3,549

RSUs
9,791

 
3,063

 
10,235

 
3,611

Warrants
411

 
—

 
137

 
—

Diluted impact of ESPP
73

 
—

 
125

 
—

Diluted common stock subject to vesting
100

 
—

 
113

 
—

Total
25,143

 
6,616

 
29,484

 
7,160

Significant Customer Information and Other Information (Tables)
Schedules of concentration of risk
Retailers and distributors with revenue equal to or greater than 10% of total revenue for the three and nine months ended September 30, 2017 and October 1, 2016 were as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
A
17
%
 
14
%
 
14
%
 
14
%
B
12

 
*

 
*

 
*

C
*

 
13

 
*

 
12

D
*

 
10

 
*

 
15

* Represents less than 10%.
Retailers and distributors with revenue equal to or greater than 10% of total revenue for the three and nine months ended September 30, 2017 and October 1, 2016 were as follows:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
A
17
%
 
14
%
 
14
%
 
14
%
B
12

 
*

 
*

 
*

C
*

 
13

 
*

 
12

D
*

 
10

 
*

 
15

* Represents less than 10%.

Retailers and distributors that accounted for equal to or greater than 10% of accounts receivable at September 30, 2017 and December 31, 2016 were as follows:
 
September 30,
2017
 
December 31,
2016
 
 
 
 
 
 
A
17
%
 
19
%
B
16

 
*

C
10

 
*

D
*

 
16

E
*

 
12

 
* Represents less than 10%.

Revenue by geographic region, based on ship-to destinations, was as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
October 1, 2016
 
September 30, 2017
 
October 1, 2016
 
 
 
 
 
 
 
 
United States
$
244,204

 
$
361,239

 
$
613,825

 
$
1,158,116

Americas excluding United States
25,276

 
25,939

 
69,656

 
76,708

Europe, Middle East, and Africa
88,672

 
80,932

 
285,045

 
255,127

APAC
34,370

 
35,692

 
76,237

 
105,735

Total
$
392,522

 
$
503,802

 
$
1,044,763

 
$
1,595,686

Basis of Presentation and Summary of Significant Accounting Policies - Customer Bankruptcy & Non-Monetary Transactions (Details) (USD $)
9 Months Ended 3 Months Ended 6 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Wynit Distribution [Member]
Customer Concentration Risk [Member]
Jul. 1, 2017
Wynit Distribution [Member]
Revenue [Member]
Customer Concentration Risk [Member]
Jul. 1, 2017
Wynit Distribution [Member]
Accounts Receivable [Member]
Customer Concentration Risk [Member]
Sep. 30, 2017
Advertising Barter Transactions [Member]
Sep. 30, 2017
Advertising Barter Transactions [Member]
Dec. 31, 2016
Advertising Barter Transactions [Member]
Concentration Risk [Line Items]
 
 
 
 
 
 
 
 
Standard product warranty term
2 years 
 
 
 
 
 
 
 
Concentration risk, percentage
 
 
 
11.00% 
19.00% 
 
 
 
Unrecognized revenue, net
 
 
$ 8,100,000 
 
 
 
 
 
Allowance for Doubtful Accounts Receivable
 
 
35,800,000 
 
 
 
 
 
Unrecoverable inventory
 
 
5,500,000 
 
 
 
 
 
Accounts receivable for shipments made in the quarter
 
 
30,300,000 
 
 
 
 
 
Insurance proceeds receivable, accounts receivable
 
 
22,700,000 
 
 
 
 
 
Probably insurance proceeds
 
 
26,800,000 
 
 
 
 
 
Insurance proceeds receivable, inventory
 
 
4,100,000 
 
 
 
 
 
Charges Offset By Insurance Recorded
 
 
9,000,000 
 
 
 
 
 
Bad debt expense
7,805,000 
0 
7,600,000 
 
 
 
 
 
Cost of revenue
 
 
1,400,000 
 
 
 
 
 
Nonmonetary transaction, gross operating revenue recognized
 
 
 
 
 
 
 
15,000,000 
Nonmonetary transaction, cost of goods transferred
 
 
 
 
 
 
 
7,000,000 
Nonmonetary transaction, advertising credit received
 
 
 
 
 
 
 
13,000,000 
Nonmonetary transaction, cash received
 
 
 
 
 
 
 
2,000,000 
Nonmonetary transaction, remaining advertising credit
 
 
 
 
 
12,700,000 
12,700,000 
13,000,000 
Nonmonetary transaction, advertising credit, expected period of use
 
 
 
 
 
 
 
4 years 
Nonmonetary transaction, advertising credit utilized during the period
 
 
 
 
 
$ 0 
$ 300,000 
 
Basis of Presentation and Summary of Significant Accounting Policies - Out of Period Adjustments (Details) (Understated Income Tax Expense [Member], USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Understated Income Tax Expense [Member]
 
Quantifying Misstatement in Current Year Financial Statements [Line Items]
 
Out-of-period adjustment
$ 3.0 
Basis of Presentation and Summary of Significant Accounting Policies - Accounting Pronouncements Recently Adopted (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Oct. 1, 2016
Accounting Standards Update 2016-09 [Member]
Dec. 31, 2016
Retained Earnings [Member]
Accounting Standards Update 2016-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
 
Cumulative effect of adjustment
 
 
 
$ 4,900,000 
Net Cash Provided by (Used in) Financing Activities
3,089,000 
13,852,000 
(25,500,000)
 
Net Cash Provided by (Used in) Operating Activities
$ 8,718,000 
$ 65,718,000 
$ 25,500 
 
Fair Value Measurements (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Dec. 31, 2016
Assets:
 
 
 
 
 
Available for sale securities
$ 378,548,000 
 
$ 378,548,000 
 
$ 404,693,000 
Liabilities:
 
 
 
 
 
Transfers between fair value levels
0 
0 
0 
0 
 
U.S. government agencies [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Available for sale securities
24,912,000 
 
24,912,000 
 
86,526,000 
Corporate debt securities [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Available for sale securities
353,636,000 
 
353,636,000 
 
318,167,000 
Fair Value, Measurements, Recurring [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Money market funds
129,790,000 
 
129,790,000 
 
50,125,000 
Derivative assets
1,307,000 
 
1,307,000 
 
10,625,000 
Total
557,695,000 
 
557,695,000 
 
537,562,000 
Liabilities:
 
 
 
 
 
Derivative liabilities
11,826,000 
 
11,826,000 
 
3,780,000 
Fair Value, Measurements, Recurring [Member] |
U.S. government agencies [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Available for sale securities
50,707,000 
 
50,707,000 
 
86,526,000 
Fair Value, Measurements, Recurring [Member] |
Corporate debt securities [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Available for sale securities
375,891,000 
 
375,891,000 
 
390,286,000 
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Money market funds
129,790,000 
 
129,790,000 
 
50,125,000 
Derivative assets
0 
 
0 
 
0 
Total
129,790,000 
 
129,790,000 
 
50,125,000 
Liabilities:
 
 
 
 
 
Derivative liabilities
0 
 
0 
 
0 
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member] |
U.S. government agencies [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Available for sale securities
0 
 
0 
 
0 
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member] |
Corporate debt securities [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Available for sale securities
0 
 
0 
 
0 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Money market funds
0 
 
0 
 
0 
Derivative assets
1,307,000 
 
1,307,000 
 
10,625,000 
Total
427,905,000 
 
427,905,000 
 
487,437,000 
Liabilities:
 
 
 
 
 
Derivative liabilities
11,826,000 
 
11,826,000 
 
3,780,000 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member] |
U.S. government agencies [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Available for sale securities
50,707,000 
 
50,707,000 
 
86,526,000 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member] |
Corporate debt securities [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Available for sale securities
375,891,000 
 
375,891,000 
 
390,286,000 
Fair Value, Measurements, Recurring [Member] |
Level 3 [Member]
 
 
 
 
 
Assets:
 
 
 
 
 
Total
$ 0 
 
$ 0 
 
$ 0 
Financial Instruments - Amortized to fair value (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Oct. 1, 2016
Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Impairment losses recorded on available-for-sale securities
$ 0 
 
 
 
Cash and cash equivalents
280,681,000 
301,320,000 
284,220,000 
535,846,000 
Available-for-sale debt securities, gross unrealized gains
54,000 
32,000 
 
 
Available-for-sale debt securities, gross unrealized losses
(118,000)
(219,000)
 
 
Cash, cash equivalents, and available-for-sale securities, amortized cost
659,293,000 
706,200,000 
 
 
Cash, cash equivalents, available-for-sale securities, fair value
659,229,000 
706,013,000 
 
 
Total
378,548,000 
404,693,000 
 
 
U.S. government agencies [Member]
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cash and cash equivalents
25,795,000 
0 
 
 
Available-for-sale debt securities, amortized cost
50,703,000 
86,533,000 
 
 
Available-for-sale debt securities, gross unrealized gains
4,000 
8,000 
 
 
Available-for-sale debt securities, gross unrealized losses
0 
(15,000)
 
 
Cash, cash equivalents, available-for-sale securities, fair value
50,707,000 
86,526,000 
 
 
Total
24,912,000 
86,526,000 
 
 
Corporate debt securities [Member]
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cash and cash equivalents
22,255,000 
72,119,000 
 
 
Available-for-sale debt securities, amortized cost
375,959,000 
390,466,000 
 
 
Available-for-sale debt securities, gross unrealized gains
50,000 
24,000 
 
 
Available-for-sale debt securities, gross unrealized losses
(118,000)
(204,000)
 
 
Cash, cash equivalents, available-for-sale securities, fair value
375,891,000 
390,286,000 
 
 
Total
353,636,000 
318,167,000 
 
 
Cash [Member]
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cash and cash equivalents
102,841,000 
179,076,000 
 
 
Money market funds [Member]
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Cash and cash equivalents
$ 129,790,000 
$ 50,125,000 
 
 
Financial Instruments - Unrealized Loss Position (Details) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
 
 
Available-for-sale securities in continuous loss position for one year or more, gross unrealized losses
$ 0 
$ 0 
Financial Instruments - Contractual maturity dates (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
 
 
Due in one year
$ 364,734 
$ 355,152 
Due in one to two years
13,814 
49,541 
Total
$ 378,548 
$ 404,693 
Financial Instruments - Additional Derivative Information (Details) (Foreign currency exchange contract [Member], USD $)
In Millions, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Not designated as hedging instrument [Member]
 
 
Derivative [Line Items]
 
 
Derivative, notional amount
$ 93.6 
$ 177.0 
Cash flow hedges [Member] |
Designated as hedging instrument [Member]
 
 
Derivative [Line Items]
 
 
Derivative, notional amount based on forecasted revenue
142.7 
20.0 
Derivative, notional amount based on forecasted expense
$ 0 
$ 20.9 
Financial Instruments - Financial Position, Fair Value (Details) (Foreign currency exchange contract [Member], USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Derivatives, Fair Value [Line Items]
 
 
Fair Value Derivative Assets
$ 1,307 
$ 10,625 
Fair Value Derivative Liabilities
11,826 
3,780 
Designated as hedging instrument [Member] |
Prepaid expenses and other current assets [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value Derivative Assets
0 
813 
Fair Value Derivative Liabilities
0 
0 
Designated as hedging instrument [Member] |
Accrued liabilities [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value Derivative Assets
0 
0 
Fair Value Derivative Liabilities
11,826 
1,428 
Not designated as hedging instrument [Member] |
Prepaid expenses and other current assets [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value Derivative Assets
1,307 
9,812 
Fair Value Derivative Liabilities
0 
0 
Not designated as hedging instrument [Member] |
Accrued liabilities [Member]
 
 
Derivatives, Fair Value [Line Items]
 
 
Fair Value Derivative Assets
0 
0 
Fair Value Derivative Liabilities
$ 0 
$ 2,352 
Financial Instruments - Statement of Operations and Other Comprehensive Income (Details) (Foreign currency exchange contract [Member], USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Designated as hedging instrument [Member] |
Cash flow hedges [Member]
 
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
 
Gain (loss) recognized in OCI – effective portion
$ (6,603)
$ (560)
$ (20,590)
$ 975 
Revenue [Member] |
Designated as hedging instrument [Member] |
Cash flow hedges [Member]
 
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
 
Gain (loss) reclassified from OCI into income – effective portion
(6,617)
3,060 
(6,897)
1,511 
Operating expenses [Member] |
Designated as hedging instrument [Member] |
Cash flow hedges [Member]
 
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
 
Gain (loss) reclassified from OCI into income – effective portion
0 
(65)
(1,405)
2,343 
Other Income (Expense), Net [Member] |
Designated as hedging instrument [Member] |
Cash flow hedges [Member]
 
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
 
Gain (loss) recognized in income – ineffective portion
0 
76 
21 
(109)
Gain recognized in income – excluded time value portion
672 
0 
1,516 
0 
Other Income (Expense), Net [Member] |
Not designated as hedging instrument [Member]
 
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
 
Gain (loss) recognized in income
$ (2,062)
$ (477)
$ (8,838)
$ 3,567 
Financial Instruments - Offsetting of Foreign Currency Derivative Contracts (Details) (Foreign currency exchange contract [Member], USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Foreign currency exchange contract [Member]
 
 
Offsetting Liabilities [Line Items]
 
 
Gross Assets Recognized
$ 11,826 
$ 3,780 
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
0 
0 
Net Amounts Presented in Condensed Consolidated Balance Sheets
11,826 
3,780 
Gross Amounts Not Offset in Condensed Consolidated Balance Sheets, Financial Instruments
1,307 
3,780 
Gross Amounts Not Offset in Condensed Consolidated Balance Sheets, Cash Collateral Pledged
0 
0 
Net Amount
10,519 
0 
Offsetting Assets [Line Items]
 
 
Gross Amounts of Recognized Assets
1,307 
10,625 
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
0 
0 
Net Amounts Presented in Condensed Consolidated Balance Sheets
1,307 
10,625 
Gross Amounts Not Offset in Condensed Consolidated Balance Sheets, Financial Instruments
1,307 
3,780 
Gross Amounts Not Offset in Condensed Consolidated Balance Sheets, Cash Collateral Received
0 
0 
Net Amount
$ 0 
$ 6,845 
Balance Sheet Components - Account Receivable Reserves (Details) (Revenue Reserve [Member], USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Revenue Reserve [Member]
 
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
 
Beginning balance
$ 51,520 
$ 80,277 
$ 98,851 
$ 74,045 
Increases
146,356 
46,654 
236,267 
166,205 
Returns taken
(135,978)
(59,763)
(273,220)
(173,082)
Ending balances
$ 61,898 
$ 67,168 
$ 61,898 
$ 67,168 
Balance Sheet Components - Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Components
$ 9,072 
$ 1,035 
Finished goods
129,709 
229,352 
Total inventories
$ 138,781 
$ 230,387 
Balance Sheet Components - Prepaid Expenses and Other Current Assets (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Income tax receivable
$ 96,467 
$ 481 
POP displays, net
16,189 
22,804 
Prepaid marketing
3,865 
5,764 
Derivative assets
1,307 
10,625 
Prepaid expenses
16,508 
17,161 
Insurance receivable
26,795 
0 
Other
12,523 
9,511 
Total prepaid expenses and other current assets
$ 173,654 
$ 66,346 
Balance Sheet Components - Property and Equipment, Net (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Property, Plant and Equipment [Line Items]
 
 
Total property and equipment
$ 138,567 
$ 115,889 
Less: Accumulated depreciation and amortization
(47,744)
(39,336)
Property and equipment, net
90,823 
76,553 
Tooling and manufacturing equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property and equipment
55,713 
60,944 
Furniture and office equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property and equipment
18,463 
14,424 
Purchased and internally-developed software [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property and equipment
18,524 
12,032 
Leasehold improvements [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property and equipment
$ 45,867 
$ 28,489 
Balance Sheet Components - Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Goodwill
$ 51,036 
$ 51,000 
Balance Sheet Components - Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Gross
$ 27,926 
 
$ 27,926 
 
$ 27,370 
Accumulated Amortization
(7,923)
 
(7,923)
 
(3,789)
Net
20,003 
 
20,003 
 
23,581 
Intangible assets, gross
31,866 
 
31,866 
 
31,310 
Intangible assets, net
23,943 
 
23,943 
 
27,521 
Amortization of intangible assets
1,400 
500 
4,134 
1,578 
 
Developed technology [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Gross
26,648 
 
26,648 
 
26,092 
Accumulated Amortization
(7,209)
 
(7,209)
 
(3,247)
Net
19,439 
 
19,439 
 
22,845 
Weighted Average Remaining Useful Life (years)
 
 
4 years 8 months 12 days 
 
 
Trademarks and other [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Gross
1,278 
 
1,278 
 
1,278 
Accumulated Amortization
(714)
 
(714)
 
(542)
Net
564 
 
564 
 
736 
Weighted Average Remaining Useful Life (years)
 
 
1 year 2 months 12 days 
 
 
In Process Research and Development [Member]
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
Indefinite-Lived Intangible Assets (Excluding Goodwill)
$ 3,940 
 
$ 3,940 
 
$ 3,940 
Balance Sheet Components - Estimated Future Amortization Expense (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
 
 
Remaining 2017
$ 1,391 
 
2018
5,562 
 
2019
4,782 
 
2020
3,818 
 
2021
3,772 
 
Thereafter
678 
 
Net
20,003 
23,581 
Cost of revenue [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Remaining 2017
1,333 
 
2018
5,332 
 
2019
4,552 
 
2020
3,772 
 
2021
3,772 
 
Thereafter
678 
 
Net
19,439 
 
Operating expenses [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Remaining 2017
58 
 
2018
230 
 
2019
230 
 
2020
46 
 
2021
0 
 
Thereafter
0 
 
Net
$ 564 
 
Balance Sheet Components - Accrued Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Product warranty
$ 86,679 
$ 99,923 
Accrued manufacturing expense and freight
43,045 
75,579 
Accrued sales incentives
66,237 
74,181 
Accrued sales and marketing
28,711 
41,948 
Accrued co-op advertising and marketing development funds
18,273 
40,002 
Sales taxes and VAT payable
17,098 
8,891 
Employee-related liabilities
28,484 
13,934 
Inventory received but not billed
5,663 
7,363 
Accrued legal fees
7,319 
3,963 
Derivative liabilities
11,826 
3,780 
Other
32,822 
20,997 
Accrued liabilities
$ 346,157 
$ 390,561 
Balance Sheet Components - Product Warranty (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward]
 
 
 
 
Beginning balances
$ 72,761 
$ 76,841 
$ 99,923 
$ 40,212 
Charged to cost of revenue
26,825 
47,042 
44,167 
148,494 
Changes related to pre-existing warranties
5,669 
(18,727)
8,142 
(19,214)
Settlement of claims
(18,576)
(42,215)
(65,553)
(106,551)
Ending balances
$ 86,679 
$ 62,941 
$ 86,679 
$ 62,941 
Balance Sheet Components - Restructuring (Details) (Employee Severance [Member], USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
employee
Oct. 1, 2016
Employee Severance [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Expected number of positions eliminated
 
 
110 
 
Number of positions eliminated in the period, percent
 
 
6.00% 
 
Severance costs
 
 
$ 6,400,000 
 
Restructuring Reserve [Roll Forward]
 
 
 
 
Beginning balance
1,022,000 
0 
0 
0 
Restructuring charges
0 
0 
6,375,000 
0 
Cash paid
(359,000)
0 
(4,984,000)
0 
Other - noncash
0 
0 
(728,000)
0 
Restructuring Reserve
$ 663,000 
$ 0 
$ 663,000 
$ 0 
Balance Sheet Components - Accumulated Other Comprehensive Income (Loss) (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
AOCI Attributable to Parent, Net of Tax [Roll Forward]
 
 
 
 
Balance, beginning of period
 
 
$ 998,532 
 
Other comprehensive income (loss)
48 
(164)
121 
(38)
Balance, end of period
831,635 
 
831,635 
 
Unrealized Gains (Losses) on Cash Flow Hedges [Member]
 
 
 
 
AOCI Attributable to Parent, Net of Tax [Roll Forward]
 
 
 
 
Balance, beginning of period
 
 
(477)
 
Other comprehensive income (loss) before reclassifications
 
 
(20,582)
 
Amounts reclassified from AOCI
 
 
8,264 
 
Other comprehensive income (loss)
 
 
(12,318)
 
Balance, end of period
(12,795)
 
(12,795)
 
Currency Translation Adjustments [Member]
 
 
 
 
AOCI Attributable to Parent, Net of Tax [Roll Forward]
 
 
 
 
Balance, beginning of period
 
 
(314)
 
Other comprehensive income (loss) before reclassifications
 
 
314 
 
Amounts reclassified from AOCI
 
 
0 
 
Other comprehensive income (loss)
 
 
314 
 
Balance, end of period
0 
 
0 
 
Unrealized Gains (Losses) on Available-for-Sale Investments [Member]
 
 
 
 
AOCI Attributable to Parent, Net of Tax [Roll Forward]
 
 
 
 
Balance, beginning of period
 
 
(187)
 
Other comprehensive income (loss) before reclassifications
 
 
133 
 
Amounts reclassified from AOCI
 
 
(12)
 
Other comprehensive income (loss)
 
 
121 
 
Balance, end of period
(66)
 
(66)
 
AOCI Attributable to Parent [Member]
 
 
 
 
AOCI Attributable to Parent, Net of Tax [Roll Forward]
 
 
 
 
Balance, beginning of period
 
 
(978)
 
Other comprehensive income (loss) before reclassifications
 
 
(20,135)
 
Amounts reclassified from AOCI
 
 
8,252 
 
Other comprehensive income (loss)
 
 
(11,883)
 
Balance, end of period
$ (12,861)
 
$ (12,861)
 
Long-Term Debt (Details) (USD $)
0 Months Ended
May 3, 2017
Line of Credit [Member]
2015 Credit Agreement [Member]
Dec. 31, 2016
Line of Credit [Member]
2015 Credit Agreement [Member]
Dec. 31, 2015
Line of Credit [Member]
2015 Credit Agreement [Member]
Sep. 30, 2017
Letter of Credit [Member]
Dec. 31, 2016
Letter of Credit [Member]
Sep. 30, 2017
Letter of Credit [Member]
2015 Credit Agreement [Member]
May 3, 2017
Letter of Credit [Member]
2015 Credit Agreement [Member]
Dec. 31, 2015
Letter of Credit [Member]
2015 Credit Agreement [Member]
May 3, 2017
Swing Line Loan [Member]
2015 Credit Agreement [Member]
Dec. 31, 2015
Swing Line Loan [Member]
2015 Credit Agreement [Member]
May 3, 2017
Minimum [Member]
Line of Credit [Member]
2015 Credit Agreement [Member]
Base Rate [Member]
May 3, 2017
Minimum [Member]
Line of Credit [Member]
2015 Credit Agreement [Member]
London Interbank Offered Rate (LIBOR) [Member]
May 3, 2017
Maximum [Member]
Line of Credit [Member]
2015 Credit Agreement [Member]
Base Rate [Member]
May 3, 2017
Maximum [Member]
Line of Credit [Member]
2015 Credit Agreement [Member]
London Interbank Offered Rate (LIBOR) [Member]
May 3, 2017
Silicon Valley Bank [Member]
Line of Credit [Member]
2015 Credit Agreement [Member]
Line of Credit Facility [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit facility, borrowing capacity
$ 100,000,000.0 
$ 250,000,000.0 
$ 250,000,000.0 
 
 
 
$ 50,000,000.0 
$ 50,000,000.0 
$ 25,000,000.0 
$ 25,000,000.0 
 
 
 
 
 
Credit facility, amount outstanding
 
 
 
38,000,000 
38,000,000 
38,300,000 
 
 
 
 
 
 
 
 
 
Basis spread on variable rate
 
 
 
 
 
 
 
 
 
 
0.50% 
1.50% 
1.00% 
2.00% 
 
Covenant compliance, unrestricted cash liquidity requirement
$ 200,000,000.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 100,000,000.0 
Commitments and Contingencies - Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]
 
Remaining 2017
$ 9,244 
2018
40,767 
2019
46,623 
2020
42,860 
2021
41,296 
Thereafter
100,317 
Total future minimum lease payments
$ 281,107 
Commitments and Contingencies - Narrative (Details)
0 Months Ended 1 Months Ended
May 10, 2016
investor
Jun. 9, 2017
Pending Litigation [Member]
lawsuit
Feb. 16, 2016
PurePulse Class Action Lawsuit [Member]
Pending Litigation [Member]
lawsuit
Loss Contingencies [Line Items]
 
 
 
Loss contingency, number of lawsuits filed
 
2 
2 
Loss contingency, individual investors named as lead plaintiffs
5 
 
 
Stockholders' Equity- Narrative (Details) (USD $)
In Millions, except Share data, unless otherwise specified
9 Months Ended 1 Months Ended 0 Months Ended
Sep. 30, 2017
Employee Stock Options And Restricted Stock Units [Member]
Sep. 30, 2017
Common Class A [Member]
Jul. 10, 2017
Common Class A [Member]
Sep. 30, 2017
Common Class A [Member]
2015 Equity Incentive Plan [Member]
Stock Options [Member]
May 31, 2015
Common Class A [Member]
2015 Employee Stock Purchase Plan [Member]
Stock Options [Member]
Jul. 20, 2017
Eligible Employees [Member]
2015 Equity Incentive Plan [Member]
Restricted Stock Units (RSUs) [Member]
Apr. 14, 2017
Eligible Employees [Member]
2015 Equity Incentive Plan [Member]
Restricted Stock Units (RSUs) [Member]
Jul. 19, 2017
Eligible Employees [Member]
2015 Equity Incentive Plan [Member]
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
Unfunded right to receive stock on a date in time in the future (in shares)
 
 
 
 
 
 
1 
 
Out-of-the-money options
 
 
 
 
 
 
2 
 
Minimum vesting
 
 
 
 
 
 
1 year 
 
Underwater options tendered
 
 
 
 
 
 
 
3,700,000 
Underwater options tendered, percent
 
 
 
 
 
 
 
85.00% 
Stock issued in exchange (in shares)
 
 
 
 
 
1,800,000 
 
 
Stock issued in exchange
 
 
 
 
 
$ 8.5 
 
 
Common stock reserved for future issuance (in shares)
 
 
 
14,800,000 
3,800,000 
 
 
 
Percent of share price available to employees
 
 
 
 
85.00% 
 
 
 
Offering period
 
 
 
 
6 months 
 
 
 
Unrecognized compensation expense related to unvested options
$ 179.9 
 
 
 
 
 
 
 
Unrecognized compensation expense related to unvested options, estimated weighted average period
2 years 2 months 1 day 
 
 
 
 
 
 
 
Number of securities called by each warrant
 
 
500,000 
 
 
 
 
 
Exercise price of warrant (in usd per share)
 
 
$ 5.23 
 
 
 
 
 
Warrants outstanding
 
500,000 
 
 
 
 
 
 
Stockholders' Equity - Stock Option Activity (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
Balance, beginning of period (in shares)
34,454 
Granted (in shares)
1,150 
Exercised (in shares)
(6,634)
Canceled (in shares)
(6,775)
Balance, end of period (in shares)
22,195 
Options exercisable (in shares)
16,455 
Options vested and expected to vest (in shares)
22,084 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
 
Balance, weighted average exercise price, beginning of period (in dollars per share)
$ 3.85 
Granted, weighted average exercise price (in dollars per share)
$ 5.63 
Exercised, weighted average exercise price (in dollars per share)
$ 1.15 
Canceled, weighted average exercise price (in dollars per share)
$ 9.59 
Balance, weighted average exercise price, end of period (in dollars per share)
$ 2.99 
Options exercisable, weighted average exercise price (in dollars per share)
$ 2.42 
Options vested and expected to vest, weighted average exercise price (in dollars per share)
$ 2.99 
Options outstanding, aggregate intrinsic value, end of period
$ 93,199 
Options exercisable, aggregate intrinsic value
77,220 
Options vested and expected to vest, aggregate intrinsic value
$ 92,872 
Fair value of the Class A common stock (in dollars per share)
$ 6.96 
Stockholders' Equity - Restricted Stock Unit Activity (Details) (Restricted Stock Units (RSUs) [Member], USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Restricted Stock Units (RSUs) [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
 
Unvested balance—December 31, 2016 (in shares)
11,578 
Granted (in shares)
14,499 
Vested (in shares)
(4,673)
Forfeited or canceled (in shares)
(3,909)
Unvested balance—September 30, 2017 (in shares)
17,495 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
 
Unvested balance—December 31, 2016 (in dollars per share)
$ 16.85 
Granted (in dollars per share)
$ 6.55 
Vested (in dollars per share)
$ 12.81 
Forfeited or canceled (in dollars per share)
$ 12.94 
Unvested balance—September 30, 2017 (in dollars per share)
$ 10.27 
Stockholders' Equity - Stock Compensation Expense (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
Total stock-based compensation
$ 22,797 
$ 20,005 
$ 67,256 
$ 58,175 
Cost of revenue [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
Total stock-based compensation
1,379 
1,014 
2,889 
3,407 
Research and development [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
Total stock-based compensation
12,947 
12,314 
40,280 
34,432 
Sales and marketing [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
Total stock-based compensation
3,679 
3,030 
11,301 
8,492 
General and administrative [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
 
 
Total stock-based compensation
$ 4,792 
$ 3,647 
$ 12,786 
$ 11,844 
Income Taxes (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Dec. 31, 2016
Income Tax Contingency [Line Items]
 
 
 
 
 
Income tax expense
$ 86,227,000 
$ 18,294,000 
$ 51,883,000 
$ 31,900,000 
 
Effective income tax rate
(317.30%)
41.20% 
(28.80%)
42.30% 
 
Valuation allowance recorded against deferred tax assets
111,400,000 
 
111,400,000 
 
 
Deferred tax receivable
75,000,000 
 
75,000,000 
 
 
Deferred tax assets, net
46,221,000 
 
46,221,000 
 
174,097,000 
Unrecognized tax benefits
37,000,000 
 
37,000,000 
 
 
Unrecognized tax benefits that would impact effective tax rate
28,500,000 
 
28,500,000 
 
 
Domestic Tax Authority [Member]
 
 
 
 
 
Income Tax Contingency [Line Items]
 
 
 
 
 
Deferred tax assets, net
41,900,000 
 
41,900,000 
 
 
Minimum [Member]
 
 
 
 
 
Income Tax Contingency [Line Items]
 
 
 
 
 
Potential decreases in underlying unrecognized tax benefits
0 
 
0 
 
 
Maximum [Member]
 
 
 
 
 
Income Tax Contingency [Line Items]
 
 
 
 
 
Potential decreases in underlying unrecognized tax benefits
$ 5,500,000 
 
$ 5,500,000 
 
 
Net Income (Loss) per Share (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Numerator:
 
 
 
 
Net income (loss)
$ (113,403)
$ 26,120 
$ (231,722)
$ 43,496 
Denominator:
 
 
 
 
Weighted-average shares of common stock—basic (in shares)
234,242 
222,412 
230,918 
219,079 
Effect of dilutive securities (in shares)
0 
21,275 
0 
23,573 
Weighted-average shares of common stock—diluted (in shares)
234,242 
243,687 
230,918 
242,652 
Net income (loss) per share:
 
 
 
 
Basic (in dollars per share)
$ (0.48)
$ 0.12 
$ (1.00)
$ 0.20 
Diluted (in dollars per share)
$ (0.48)
$ 0.11 
$ (1.00)
$ 0.18 
Net Income (Loss) per Share - Antidilutive Securities (Details)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from computation of earnings per share, amount (in shares)
25,143 
6,616 
29,484 
7,160 
Redeemable convertible preferred stock and stock options to purchase common stock [Member] |
Common Stock [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from computation of earnings per share, amount (in shares)
14,768 
3,553 
18,874 
3,549 
Restricted Stock Units (RSUs) [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from computation of earnings per share, amount (in shares)
9,791 
3,063 
10,235 
3,611 
Warrant [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from computation of earnings per share, amount (in shares)
411 
0 
137 
0 
Diluted Impact of ESPP [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from computation of earnings per share, amount (in shares)
73 
0 
125 
0 
Diluted Common Stock Subject to Vesting [Member]
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from computation of earnings per share, amount (in shares)
100 
0 
113 
0 
Significant Customer Information and Other Information (Details) (USD $)
3 Months Ended 9 Months Ended 6 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 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Oct. 1, 2016
Sep. 30, 2017
Geographic Concentration Risk [Member]
Non-US [Member]
Dec. 31, 2016
Geographic Concentration Risk [Member]
Non-US [Member]
Jul. 1, 2017
Revenue [Member]
Customer Concentration Risk [Member]
Wynit Distribution [Member]
Sep. 30, 2017
Revenue [Member]
Customer Concentration Risk [Member]
Customer A [Member]
Oct. 1, 2016
Revenue [Member]
Customer Concentration Risk [Member]
Customer A [Member]
Sep. 30, 2017
Revenue [Member]
Customer Concentration Risk [Member]
Customer A [Member]
Oct. 1, 2016
Revenue [Member]
Customer Concentration Risk [Member]
Customer A [Member]
Sep. 30, 2017
Revenue [Member]
Customer Concentration Risk [Member]
Customer B [Member]
Oct. 1, 2016
Revenue [Member]
Customer Concentration Risk [Member]
Customer C [Member]
Oct. 1, 2016
Revenue [Member]
Customer Concentration Risk [Member]
Customer C [Member]
Oct. 1, 2016
Revenue [Member]
Customer Concentration Risk [Member]
Customer D [Member]
Oct. 1, 2016
Revenue [Member]
Customer Concentration Risk [Member]
Customer D [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
United States [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
United States [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
United States [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
United States [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
Americas excluding United States [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
Americas excluding United States [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
Americas excluding United States [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
Americas excluding United States [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
Europe, Middle East, and Africa [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
Europe, Middle East, and Africa [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
Europe, Middle East, and Africa [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
Europe, Middle East, and Africa [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
APAC [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
APAC [Member]
Sep. 30, 2017
Revenue [Member]
Geographic Concentration Risk [Member]
APAC [Member]
Oct. 1, 2016
Revenue [Member]
Geographic Concentration Risk [Member]
APAC [Member]
Jul. 1, 2017
Accounts Receivable [Member]
Customer Concentration Risk [Member]
Wynit Distribution [Member]
Sep. 30, 2017
Accounts Receivable [Member]
Customer Concentration Risk [Member]
Customer A [Member]
Dec. 31, 2016
Accounts Receivable [Member]
Customer Concentration Risk [Member]
Customer A [Member]
Sep. 30, 2017
Accounts Receivable [Member]
Customer Concentration Risk [Member]
Customer B [Member]
Sep. 30, 2017
Accounts Receivable [Member]
Customer Concentration Risk [Member]
Customer C [Member]
Dec. 31, 2016
Accounts Receivable [Member]
Customer Concentration Risk [Member]
Customer D [Member]
Dec. 31, 2016
Accounts Receivable [Member]
Customer Concentration Risk [Member]
Customer E [Member]
Concentration Risk [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Concentration risk, percentage
 
 
 
 
 
 
11.00% 
17.00% 
14.00% 
14.00% 
14.00% 
12.00% 
13.00% 
12.00% 
10.00% 
15.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19.00% 
17.00% 
19.00% 
16.00% 
10.00% 
16.00% 
12.00% 
Revenue
$ 392,522,000 
$ 503,802,000 
$ 1,044,763,000 
$ 1,595,686,000 
 
 
 
 
 
 
 
 
 
 
 
 
$ 392,522,000 
$ 503,802,000 
$ 1,044,763,000 
$ 1,595,686,000 
$ 244,204,000 
$ 361,239,000 
$ 613,825,000 
$ 1,158,116,000 
$ 25,276,000 
$ 25,939,000 
$ 69,656,000 
$ 76,708,000 
$ 88,672,000 
$ 80,932,000 
$ 285,045,000 
$ 255,127,000 
$ 34,370,000 
$ 35,692,000 
$ 76,237,000 
$ 105,735,000 
 
 
 
 
 
 
 
Long-lived assets including property and equipment
 
 
 
 
$ 26,700,000 
$ 30,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions - Narrative (Details) (USD $)
1 Months Ended 1 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Dec. 31, 2016
Pebble Industries, Inc [Member]
Dec. 31, 2016
Pebble Industries, Inc [Member]
In Process Research and Development [Member]
Dec. 31, 2016
Vector Watch S.R.L. [Member]
Dec. 31, 2016
Vector Watch S.R.L. [Member]
In Process Research and Development [Member]
May 31, 2016
Coin, Inc [Member]
May 31, 2016
Coin, Inc [Member]
In Process Research and Development [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
Cash paid for acquisition
 
 
$ 23,400,000 
 
$ 15,000,000 
 
$ 7,000,000 
 
Intangibles acquired
 
 
 
9,600,000 
 
3,900,000 
 
3,900,000 
Goodwill
51,036,000 
51,000,000 
14,400,000 
 
11,400,000 
 
3,100,000 
 
Assumed liabilities
 
 
600,000 
 
300,000 
 
 
 
Consideration held as security for indemnifications obligations
 
 
$ 3,500,000 
 
$ 2,300,000 
 
 
 
Amortization period
 
 
5 years 
 
 
2 years 6 months