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Level 1 | Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to directly access. |
Level 2 | Valuations based on quoted prices for similar assets or liabilities; valuations for interest-bearing securities based on non-daily quoted prices in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
Level 3 | Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Standard | Description | Date of adoption | Effect on the financial statements or other significant matters | |||
Standards that were adopted | ||||||
Stock Compensation Accounting Standards Update (ASU) No. 2016-09 (Topic 718) | This standard simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. The new guidance also allows an entity to make a policy election to account for forfeitures as they occur. | January 1, 2017 | Adoption of the standard resulted in the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The Company recorded an increase to U.S. deferred tax assets of $179 million which was recorded directly against the accumulated deficit. The increased deferred tax asset allowed for an offset against long-term income tax payable of $16 million. A full valuation allowance was provided on the remaining U.S. deferred tax asset of $163 million, which was also recorded against the accumulated deficit. The net impact to equity was a decrease in the accumulated deficit of approximately $16 million. The Company elected to apply the change in presentation to the statements of cash flows prospectively and elected to account for forfeitures as they occur. | |||
Standards not yet adopted | ||||||
Revenue from Contracts with Customers ASU No. 2014-09, 2015-14, 2016-08, 2016-10 and 2016-12 (Topic 606) | The updated revenue standard establishes principles for recognizing revenue and develops a common revenue standard for all industries. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires that entities disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Early adoption is permitted, but not earlier than the first quarter of 2017. The retrospective or cumulative effect transition method is permitted. | January 1, 2018 | The Company completed an analysis of the impact of the standard on its sales contract portfolio by reviewing its current accounting policies and practices to identify differences that would result from applying the requirements of the new standard to its sales contracts. The Company’s analysis of its contracts under the new standard supports the recognition of its product revenue at the time product is shipped, consistent with its current revenue policy. As a result of the adoption of the new guidance, certain sales incentives will need to be estimated as variable consideration at the time product is shipped and included as a reduction to the transaction price. This will result in a reduction of revenue being recorded earlier than under the existing guidance. Additionally, for customers who purchase products directly from the Company's website, the new standard provides for a policy election whereby the Company will record revenue when the related product is shipped. This will result in recognition of revenue earlier than under existing guidance, under which the Company recognizes revenue upon delivery to the customer. The Company expects the net impact of ASU 2014-09 to be less than $5 million as a reduction to retained earnings. The Company will adopt the standard on a modified retrospective basis. | |||
Leases ASU No. 2016-02(Topic 842) | This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. The new standard should be applied on a modified retrospective basis. | January 1, 2019 | Although the Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. |
Income Taxes ASU No. 2016-16 (Topic 740) | This standard requires entities to recognize the income tax consequences of intra-entity asset transfers when they occur. This removes the exception to postpone recognition until the asset has been sold to an outside party. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted during the first interim period of a fiscal year. | January 1, 2018 | The Company intends to apply the modified retrospective approach upon adoption. The Company expects that the adoption of ASU 2016-16 on January 1, 2018 will result in a $15 million cumulative-effect increase in accumulated deficit on its consolidated financial statements and related disclosures. | |||
Intangible - Goodwill and Other ASU No. 2017-04 (Topic 350) | This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment will be determined based on the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and requires a prospective transition method. | January 1, 2020 | The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements and related disclosures. | |||
Stock Compensation ASU No. 2017-09 (Topic 718) | This standard clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this standard, modification is required only if the fair value, the vesting conditions, or the classification of an award as equity or liability changes as a result of the change in terms or conditions. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted. | January 1, 2018 | The Company does not expect that the adoption of ASU 2017-09 will have a material impact to its consolidated financial statements and related disclosures. The Company will adopt the amendment on a prospective basis. |
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December 31, 2017 | December 31, 2016 | ||||||||||||||||||||||
(in thousands) | Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||
Cash equivalents (1): | |||||||||||||||||||||||
Money market funds | $ | 25,251 | $ | — | $ | 25,251 | $ | 18,024 | $ | — | $ | 18,024 | |||||||||||
Commercial paper | 14,981 | — | 14,981 | — | — | — | |||||||||||||||||
Corporate debt securities | — | 2,500 | 2,500 | — | — | — | |||||||||||||||||
Agency securities | 4,999 | 4,999 | — | — | — | ||||||||||||||||||
Total cash equivalents | $ | 40,232 | $ | 7,499 | $ | 47,731 | $ | 18,024 | $ | — | $ | 18,024 | |||||||||||
Marketable securities: | |||||||||||||||||||||||
U.S. treasury securities | $ | — | $ | 4,995 | $ | 4,995 | $ | — | $ | 8,283 | $ | 8,283 | |||||||||||
Commercial paper | 19,888 | — | 19,888 | — | — | — | |||||||||||||||||
Corporate debt securities | — | 20,003 | 20,003 | — | 15,226 | 15,226 | |||||||||||||||||
Municipal securities | — | — | — | — | 2,330 | 2,330 | |||||||||||||||||
Total marketable securities | $ | 19,888 | $ | 24,998 | $ | 44,886 | $ | — | $ | 25,839 | $ | 25,839 |
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(in thousands) | December 31, 2017 | December 31, 2016 | |||||
Components | $ | 18,995 | $ | 25,236 | |||
Finished goods | 131,556 | 141,956 | |||||
Total inventory | $ | 150,551 | $ | 167,192 |
(in thousands) | Useful life (in years) | December 31, 2017 | December 31, 2016 | ||||||
Leasehold improvements | 1–11 | $ | 67,713 | $ | 48,103 | ||||
Production, engineering and other equipment | 4 | 47,502 | 46,328 | ||||||
Tooling | 1–2 | 24,871 | 23,742 | ||||||
Computers and software | 2 | 20,636 | 18,750 | ||||||
Furniture and office equipment | 3 | 14,895 | 12,530 | ||||||
Tradeshow equipment and other | 2–5 | 7,237 | 7,578 | ||||||
Construction in progress | 347 | 1,870 | |||||||
Gross property and equipment | 183,201 | 158,901 | |||||||
Less: Accumulated depreciation and amortization | (114,614 | ) | (82,392 | ) | |||||
Property and equipment, net | $ | 68,587 | $ | 76,509 |
Useful life (in months) | December 31, 2017 | ||||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||||
Purchased technology | 24–72 | $ | 49,901 | $ | (26,017 | ) | $ | 23,884 | |||||
In-process research and development (IPR&D) | 615 | — | 615 | ||||||||||
Total intangible assets | $ | 50,516 | $ | (26,017 | ) | $ | 24,499 |
Useful life (in months) | December 31, 2016 | ||||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||||
Purchased technology | 24–72 | $ | 47,001 | $ | (17,086 | ) | $ | 29,915 | |||||
IPR&D | 3,615 | — | 3,615 | ||||||||||
Total intangible assets | $ | 50,616 | $ | (17,086 | ) | $ | 33,530 |
(in thousands) | Total | ||
Year ending December 31, | |||
2018 | $ | 9,263 | |
2019 | 8,753 | ||
2020 | 4,998 | ||
2021 | 870 | ||
2022 | — | ||
$ | 23,884 |
(in thousands) | December 31, 2017 | December 31, 2016 | |||||
POP displays | $ | 16,451 | $ | 27,592 | |||
Long-term deferred tax assets | 825 | 106 | |||||
Income tax receivable | — | 33,425 | |||||
Deposits and other | 19,738 | 17,206 | |||||
Other long-term assets | $ | 37,014 | $ | 78,329 |
(in thousands) | December 31, 2017 | December 31, 2016 | |||||
Accrued payables (1) | $ | 44,582 | $ | 91,655 | |||
Employee related liabilities (1) | 24,945 | 42,577 | |||||
Accrued sales incentives | 89,549 | 40,070 | |||||
Warranty liability | 9,934 | 11,456 | |||||
Customer deposits | 8,700 | 4,381 | |||||
Income taxes payable | 1,247 | 2,756 | |||||
Purchase order commitments | 6,162 | 4,730 | |||||
Inventory received | 14,470 | 3,950 | |||||
Other | 13,441 | 9,748 | |||||
Accrued liabilities | $ | 213,030 | $ | 211,323 |
(1) | See Note 13 for amounts associated with restructuring liabilities. |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Beginning balances | $ | 11,945 | $ | 10,856 | $ | 6,405 | |||||
Charged to cost of revenue | 20,139 | 19,272 | 25,377 | ||||||||
Settlements of warranty claims | (21,711 | ) | (18,183 | ) | (20,926 | ) | |||||
Ending balances | $ | 10,373 | $ | 11,945 | $ | 10,856 |
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• | during any calendar quarter beginning after the calendar quarter ending on September 30, 2017, if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the Notes on each applicable trading day; |
• | during the five-business day period following any five consecutive trading day period in which the trading price for the Notes is less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate for the Notes on each such trading day; or |
• | upon the occurrence of specified corporate events. |
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(in thousands) | December 31, 2017 | |
Stock options outstanding | 9,809 | |
Restricted stock units outstanding | 9,483 | |
Common stock available for future grants | 23,071 | |
Total common stock shares reserved for issuance | 42,363 |
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Options outstanding | ||||||||||||
Shares (in thousands) | Weighted- average exercise price | Weighted-average remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||
Outstanding at December 31, 2016 | 12,379 | $ | 12.17 | 5.97 | $ | 32,772 | ||||||
Granted | 1,848 | 9.28 | ||||||||||
Exercised | (1,329 | ) | 1.70 | |||||||||
Forfeited/Cancelled | (3,089 | ) | 18.15 | |||||||||
Outstanding at December 31, 2017 | 9,809 | $ | 11.16 | 6.00 | $ | 19,971 | ||||||
Vested and expected to vest at December 31, 2017 | 9,786 | $ | 11.15 | 6.00 | $ | 19,971 | ||||||
Exercisable at December 31, 2017 | 8,154 | $ | 10.99 | 5.45 | $ | 19,971 |
Shares (in thousands) | Weighted- average grant date fair value | |||||
Non-vested shares at December 31, 2016 | 7,970 | $ | 18.08 | |||
Granted | 8,740 | 9.40 | ||||
Vested | (3,862 | ) | 14.95 | |||
Forfeited | (3,365 | ) | 16.62 | |||
Non-vested shares at December 31, 2017 | 9,483 | $ | 11.87 |
Year ended December 31, | |||||
2017 | 2016 | 2015 | |||
Volatility | 44%–49% | 44%–45% | 43%–54% | ||
Expected term (years) | 5.3–5.8 | 5.2–6.1 | 5.5–7.0 | ||
Risk-free interest rate | 1.8%–2.1% | 1.2%–2.0% | 1.6%–2.0% | ||
Dividend yield | —% | —% | —% |
Year ended December 31, | |||||
2017 | 2016 | 2015 | |||
Volatility | 33%–36% | 43%–54% | 39%–45% | ||
Expected term (years) | 0.5 | 0.5 | 0.5 | ||
Risk-free interest rate | 0.7%–1.2% | 0.4%–0.5% | 0.1%–0.2% | ||
Dividend yield | —% | —% | —% |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Cost of revenue | $ | 1,935 | $ | 1,616 | $ | 1,492 | |||||
Research and development | 24,963 | 31,365 | 18,024 | ||||||||
Sales and marketing | 10,498 | 13,883 | 13,762 | ||||||||
General and administrative | 13,859 | 22,663 | 47,402 | ||||||||
Total stock-based compensation expense | $ | 51,255 | $ | 69,527 | $ | 80,680 |
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Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Domestic | $ | (123,325 | ) | $ | (200,595 | ) | $ | 13,562 | |||
Foreign | (53,062 | ) | (174,579 | ) | 39,023 | ||||||
$ | (176,387 | ) | $ | (375,174 | ) | $ | 52,585 |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Current | |||||||||||
Federal | $ | (1,857 | ) | $ | (2,925 | ) | $ | 18,548 | |||
State | 240 | (356 | ) | 3,007 | |||||||
Foreign | 10,631 | 8,542 | 6,539 | ||||||||
Total current | 9,014 | 5,261 | 28,094 | ||||||||
Deferred | |||||||||||
Federal | (248 | ) | 37,573 | (11,211 | ) | ||||||
State | — | 4,436 | (204 | ) | |||||||
Foreign | (2,280 | ) | (3,441 | ) | (225 | ) | |||||
Total deferred | (2,528 | ) | 38,568 | (11,640 | ) | ||||||
Income tax expense | $ | 6,486 | $ | 43,829 | $ | 16,454 |
Year ended December 31, | ||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||
(dollars in thousands) | $ | % | $ | % | $ | % | ||||||||||||||
Reconciliation to statutory rate | ||||||||||||||||||||
Tax at federal statutory rate | $ | (61,735 | ) | (35.0 | )% | $ | (131,311 | ) | (35.0 | )% | $ | 18,405 | 35.0 | % | ||||||
Change in valuation allowance | (38,016 | ) | (21.6 | ) | 101,878 | 27.2 | 8,555 | 16.3 | ||||||||||||
DTA rate change impact due to TCJA | 74,943 | 42.5 | — | — | — | — | ||||||||||||||
Impact of foreign operations | 34,039 | 19.3 | 84,491 | 22.5 | 6,434 | 12.2 | ||||||||||||||
Stock-based compensation | 12,001 | 6.8 | 15,718 | 4.2 | 2,390 | 4.5 | ||||||||||||||
State taxes, net of federal benefit | (6,469 | ) | (3.7 | ) | (14,195 | ) | (3.8 | ) | 1,454 | 2.8 | ||||||||||
Tax credits | (9,957 | ) | (5.6 | ) | (12,992 | ) | (3.5 | ) | (21,891 | ) | (41.6 | ) | ||||||||
Other | 1,680 | 1.0 | 240 | 0.1 | 1,107 | 2.1 | ||||||||||||||
Income tax provision at effective tax rate | $ | 6,486 | 3.7 | % | $ | 43,829 | 11.7 | % | $ | 16,454 | 31.3 | % |
Year ended December 31, | |||||||
(in thousands) | 2017 | 2016 | |||||
Deferred tax assets: | |||||||
Net operating loss carryforwards | $ | 113,378 | $ | 30,193 | |||
Tax credit carryforwards | 66,983 | 22,341 | |||||
Stock-based compensation | 13,055 | 26,656 | |||||
Allowance for returns | 5,452 | 6,336 | |||||
Intangible assets | 770 | — | |||||
Accruals and reserves | 18,981 | 26,587 | |||||
Total deferred tax assets | 218,619 | 112,113 | |||||
Valuation allowance | (217,884 | ) | (110,433 | ) | |||
Total deferred tax assets, net of valuation allowance | 735 | 1,680 | |||||
Deferred tax liabilities: | |||||||
Depreciation and amortization | (292 | ) | (1,714 | ) | |||
Intangible assets | — | (2,540 | ) | ||||
Total deferred tax liabilities | (292 | ) | (4,254 | ) | |||
Net deferred tax assets (liabilities) | $ | 443 | $ | (2,574 | ) |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Gross balance at January 1 | $ | 56,909 | $ | 36,273 | $ | 16,558 | |||||
Gross increase related to current year tax positions | 20,002 | 20,594 | 19,948 | ||||||||
Gross decrease related to tax rate change for current year tax positions | (2,299 | ) | — | — | |||||||
Gross increase related to prior year tax positions | — | 130 | 108 | ||||||||
Gross decrease related to prior year tax positions | (3,927 | ) | (88 | ) | (341 | ) | |||||
Gross decrease related to tax rate change for prior year tax positions | (12,101 | ) | — | — | |||||||
$ | 58,584 | $ | 56,909 | $ | 36,273 |
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(in thousands) | Total | 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | ||||||||||||||||||||
Operating leases (1) | $ | 128,228 | $ | 22,177 | $ | 15,056 | $ | 18,244 | $ | 17,817 | $ | 16,693 | $ | 38,241 | |||||||||||||
Sponsorship commitments (2) | 7,256 | 4,487 | 2,769 | — | — | — | — | ||||||||||||||||||||
Other contractual commitments (3) | 2,766 | 2,044 | 722 | — | — | — | — | ||||||||||||||||||||
Long-term debt (4) | 175,000 | — | — | — | — | 175,000 | — | ||||||||||||||||||||
Total contractual cash obligations | $ | 313,250 | $ | 28,708 | $ | 18,547 | $ | 18,244 | $ | 17,817 | $ | 191,693 | $ | 38,241 |
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December 31, 2017 | December 31, 2016 | ||
Customer A | 16% | 15% | |
Customer B | 32% | 27% | |
Customer C | 12% | * | |
Customer D | 11% | * |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Accounts receivable sold | $ | 178,300 | $ | 167,769 | $ | 194,223 | |||||
Factoring fees | 1,630 | 1,266 | 1,566 |
Year ended December 31, | |||||
2017 | 2016 | 2015 | |||
Customer A | 15% | 17% | 14% | ||
Customer B | * | 11% | 12% |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Americas | $ | 591,879 | $ | 619,784 | $ | 868,772 | |||||
Europe, Middle East and Africa (EMEA) | 334,872 | 366,352 | 535,260 | ||||||||
Asia and Pacific (APAC) | 252,990 | 199,345 | 215,939 | ||||||||
Total revenue | $ | 1,179,741 | $ | 1,185,481 | $ | 1,619,971 |
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Twelve months ended | |||||||
(in thousands) | December 31, 2017 | December 31, 2016 | |||||
Cost of revenue | $ | 634 | $ | 497 | |||
Research and development | 10,092 | 17,197 | |||||
Sales and marketing | 7,047 | 12,064 | |||||
General and administrative | 2,519 | 13,331 | |||||
Total restructuring charges | $ | 20,292 | $ | 43,089 |
(in thousands) | Severance | Other | Total | ||||||||
Restructuring liability as of December 31, 2016 | $ | — | $ | — | $ | — | |||||
Restructuring charges | 10,312 | 6,654 | 16,966 | ||||||||
Cash paid | (9,509 | ) | (151 | ) | (9,660 | ) | |||||
Non-cash reductions | (803 | ) | (2,953 | ) | (3,756 | ) | |||||
Restructuring liability as of December 31, 2017 | $ | — | $ | 3,550 | $ | 3,550 |
(in thousands) | Severance | Other | Total | ||||||||
Restructuring liability as of December 31, 2016 | $ | 9,660 | $ | 879 | $ | 10,539 | |||||
Restructuring charges | 2,134 | 1,055 | 3,189 | ||||||||
Cash paid | (11,411 | ) | (1,884 | ) | (13,295 | ) | |||||
Non-cash reductions | 17 | — | 17 | ||||||||
Restructuring liability as of December 31, 2017 | $ | 400 | $ | 50 | $ | 450 |
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(in thousands) | Balance at Beginning of Year | Charges to Revenue | Charges to Expense | Charges to Other Accounts - Equity | Deductions/Write-offs | Balance at End of Year | |||||||||||||||||
Allowance for doubtful accounts receivable: | |||||||||||||||||||||||
Year ended December 31, 2017 | $ | 1,281 | $ | — | $ | (263 | ) | $ | — | $ | (268 | ) | $ | 750 | |||||||||
Year ended December 31, 2016 | 1,400 | — | 40 | — | (159 | ) | 1,281 | ||||||||||||||||
Year ended December 31, 2015 | 1,250 | — | 682 | — | (532 | ) | 1,400 | ||||||||||||||||
Allowance for sales returns: | |||||||||||||||||||||||
Year ended December 31, 2017 | $ | 20,038 | $ | 55,274 | $ | (48,554 | ) | $ | — | $ | — | $ | 26,758 | ||||||||||
Year ended December 31, 2016 | 26,280 | 35,136 | (41,378 | ) | — | — | 20,038 | ||||||||||||||||
Year ended December 31, 2015 | 25,747 | 48,182 | (47,649 | ) | — | — | 26,280 | ||||||||||||||||
Valuation allowance for deferred tax assets: | |||||||||||||||||||||||
Year ended December 31, 2017 | $ | 110,433 | $ | — | $ | (38,016 | ) | $ | 145,467 | $ | — | $ | 217,884 | ||||||||||
Year ended December 31, 2016 | 8,555 | — | 101,878 | — | — | 110,433 | |||||||||||||||||
Year ended December 31, 2015 | — | — | 8,555 | — | — | 8,555 |
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Level 1 | Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to directly access. |
Level 2 | Valuations based on quoted prices for similar assets or liabilities; valuations for interest-bearing securities based on non-daily quoted prices in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
Level 3 | Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Standard | Description | Date of adoption | Effect on the financial statements or other significant matters | |||
Standards that were adopted | ||||||
Stock Compensation Accounting Standards Update (ASU) No. 2016-09 (Topic 718) | This standard simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. The new guidance also allows an entity to make a policy election to account for forfeitures as they occur. | January 1, 2017 | Adoption of the standard resulted in the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The Company recorded an increase to U.S. deferred tax assets of $179 million which was recorded directly against the accumulated deficit. The increased deferred tax asset allowed for an offset against long-term income tax payable of $16 million. A full valuation allowance was provided on the remaining U.S. deferred tax asset of $163 million, which was also recorded against the accumulated deficit. The net impact to equity was a decrease in the accumulated deficit of approximately $16 million. The Company elected to apply the change in presentation to the statements of cash flows prospectively and elected to account for forfeitures as they occur. | |||
Standards not yet adopted | ||||||
Revenue from Contracts with Customers ASU No. 2014-09, 2015-14, 2016-08, 2016-10 and 2016-12 (Topic 606) | The updated revenue standard establishes principles for recognizing revenue and develops a common revenue standard for all industries. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires that entities disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Early adoption is permitted, but not earlier than the first quarter of 2017. The retrospective or cumulative effect transition method is permitted. | January 1, 2018 | The Company completed an analysis of the impact of the standard on its sales contract portfolio by reviewing its current accounting policies and practices to identify differences that would result from applying the requirements of the new standard to its sales contracts. The Company’s analysis of its contracts under the new standard supports the recognition of its product revenue at the time product is shipped, consistent with its current revenue policy. As a result of the adoption of the new guidance, certain sales incentives will need to be estimated as variable consideration at the time product is shipped and included as a reduction to the transaction price. This will result in a reduction of revenue being recorded earlier than under the existing guidance. Additionally, for customers who purchase products directly from the Company's website, the new standard provides for a policy election whereby the Company will record revenue when the related product is shipped. This will result in recognition of revenue earlier than under existing guidance, under which the Company recognizes revenue upon delivery to the customer. The Company expects the net impact of ASU 2014-09 to be less than $5 million as a reduction to retained earnings. The Company will adopt the standard on a modified retrospective basis. | |||
Leases ASU No. 2016-02(Topic 842) | This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. The new standard should be applied on a modified retrospective basis. | January 1, 2019 | Although the Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. |
Income Taxes ASU No. 2016-16 (Topic 740) | This standard requires entities to recognize the income tax consequences of intra-entity asset transfers when they occur. This removes the exception to postpone recognition until the asset has been sold to an outside party. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted during the first interim period of a fiscal year. | January 1, 2018 | The Company intends to apply the modified retrospective approach upon adoption. The Company expects that the adoption of ASU 2016-16 on January 1, 2018 will result in a $15 million cumulative-effect increase in accumulated deficit on its consolidated financial statements and related disclosures. | |||
Intangible - Goodwill and Other ASU No. 2017-04 (Topic 350) | This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment will be determined based on the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and requires a prospective transition method. | January 1, 2020 | The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements and related disclosures. | |||
Stock Compensation ASU No. 2017-09 (Topic 718) | This standard clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this standard, modification is required only if the fair value, the vesting conditions, or the classification of an award as equity or liability changes as a result of the change in terms or conditions. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted. | January 1, 2018 | The Company does not expect that the adoption of ASU 2017-09 will have a material impact to its consolidated financial statements and related disclosures. The Company will adopt the amendment on a prospective basis. |
|
Standard | Description | Date of adoption | Effect on the financial statements or other significant matters | |||
Standards that were adopted | ||||||
Stock Compensation Accounting Standards Update (ASU) No. 2016-09 (Topic 718) | This standard simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. The new guidance also allows an entity to make a policy election to account for forfeitures as they occur. | January 1, 2017 | Adoption of the standard resulted in the recognition of previously unrecognized excess tax benefits using the modified retrospective method. The Company recorded an increase to U.S. deferred tax assets of $179 million which was recorded directly against the accumulated deficit. The increased deferred tax asset allowed for an offset against long-term income tax payable of $16 million. A full valuation allowance was provided on the remaining U.S. deferred tax asset of $163 million, which was also recorded against the accumulated deficit. The net impact to equity was a decrease in the accumulated deficit of approximately $16 million. The Company elected to apply the change in presentation to the statements of cash flows prospectively and elected to account for forfeitures as they occur. | |||
Standards not yet adopted | ||||||
Revenue from Contracts with Customers ASU No. 2014-09, 2015-14, 2016-08, 2016-10 and 2016-12 (Topic 606) | The updated revenue standard establishes principles for recognizing revenue and develops a common revenue standard for all industries. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires that entities disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Early adoption is permitted, but not earlier than the first quarter of 2017. The retrospective or cumulative effect transition method is permitted. | January 1, 2018 | The Company completed an analysis of the impact of the standard on its sales contract portfolio by reviewing its current accounting policies and practices to identify differences that would result from applying the requirements of the new standard to its sales contracts. The Company’s analysis of its contracts under the new standard supports the recognition of its product revenue at the time product is shipped, consistent with its current revenue policy. As a result of the adoption of the new guidance, certain sales incentives will need to be estimated as variable consideration at the time product is shipped and included as a reduction to the transaction price. This will result in a reduction of revenue being recorded earlier than under the existing guidance. Additionally, for customers who purchase products directly from the Company's website, the new standard provides for a policy election whereby the Company will record revenue when the related product is shipped. This will result in recognition of revenue earlier than under existing guidance, under which the Company recognizes revenue upon delivery to the customer. The Company expects the net impact of ASU 2014-09 to be less than $5 million as a reduction to retained earnings. The Company will adopt the standard on a modified retrospective basis. | |||
Leases ASU No. 2016-02(Topic 842) | This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. The new standard should be applied on a modified retrospective basis. | January 1, 2019 | Although the Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures, the Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption. |
Income Taxes ASU No. 2016-16 (Topic 740) | This standard requires entities to recognize the income tax consequences of intra-entity asset transfers when they occur. This removes the exception to postpone recognition until the asset has been sold to an outside party. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted during the first interim period of a fiscal year. | January 1, 2018 | The Company intends to apply the modified retrospective approach upon adoption. The Company expects that the adoption of ASU 2016-16 on January 1, 2018 will result in a $15 million cumulative-effect increase in accumulated deficit on its consolidated financial statements and related disclosures. | |||
Intangible - Goodwill and Other ASU No. 2017-04 (Topic 350) | This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment will be determined based on the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017, and requires a prospective transition method. | January 1, 2020 | The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements and related disclosures. | |||
Stock Compensation ASU No. 2017-09 (Topic 718) | This standard clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under this standard, modification is required only if the fair value, the vesting conditions, or the classification of an award as equity or liability changes as a result of the change in terms or conditions. The updated standard is effective in annual and interim periods in fiscal years beginning after December 15, 2017, with early adoption permitted. | January 1, 2018 | The Company does not expect that the adoption of ASU 2017-09 will have a material impact to its consolidated financial statements and related disclosures. The Company will adopt the amendment on a prospective basis. |
|
December 31, 2017 | December 31, 2016 | ||||||||||||||||||||||
(in thousands) | Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||
Cash equivalents (1): | |||||||||||||||||||||||
Money market funds | $ | 25,251 | $ | — | $ | 25,251 | $ | 18,024 | $ | — | $ | 18,024 | |||||||||||
Commercial paper | 14,981 | — | 14,981 | — | — | — | |||||||||||||||||
Corporate debt securities | — | 2,500 | 2,500 | — | — | — | |||||||||||||||||
Agency securities | 4,999 | 4,999 | — | — | — | ||||||||||||||||||
Total cash equivalents | $ | 40,232 | $ | 7,499 | $ | 47,731 | $ | 18,024 | $ | — | $ | 18,024 | |||||||||||
Marketable securities: | |||||||||||||||||||||||
U.S. treasury securities | $ | — | $ | 4,995 | $ | 4,995 | $ | — | $ | 8,283 | $ | 8,283 | |||||||||||
Commercial paper | 19,888 | — | 19,888 | — | — | — | |||||||||||||||||
Corporate debt securities | — | 20,003 | 20,003 | — | 15,226 | 15,226 | |||||||||||||||||
Municipal securities | — | — | — | — | 2,330 | 2,330 | |||||||||||||||||
Total marketable securities | $ | 19,888 | $ | 24,998 | $ | 44,886 | $ | — | $ | 25,839 | $ | 25,839 |
|
(in thousands) | December 31, 2017 | December 31, 2016 | |||||
Components | $ | 18,995 | $ | 25,236 | |||
Finished goods | 131,556 | 141,956 | |||||
Total inventory | $ | 150,551 | $ | 167,192 |
(in thousands) | Useful life (in years) | December 31, 2017 | December 31, 2016 | ||||||
Leasehold improvements | 1–11 | $ | 67,713 | $ | 48,103 | ||||
Production, engineering and other equipment | 4 | 47,502 | 46,328 | ||||||
Tooling | 1–2 | 24,871 | 23,742 | ||||||
Computers and software | 2 | 20,636 | 18,750 | ||||||
Furniture and office equipment | 3 | 14,895 | 12,530 | ||||||
Tradeshow equipment and other | 2–5 | 7,237 | 7,578 | ||||||
Construction in progress | 347 | 1,870 | |||||||
Gross property and equipment | 183,201 | 158,901 | |||||||
Less: Accumulated depreciation and amortization | (114,614 | ) | (82,392 | ) | |||||
Property and equipment, net | $ | 68,587 | $ | 76,509 |
Useful life (in months) | December 31, 2017 | ||||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||||
Purchased technology | 24–72 | $ | 49,901 | $ | (26,017 | ) | $ | 23,884 | |||||
In-process research and development (IPR&D) | 615 | — | 615 | ||||||||||
Total intangible assets | $ | 50,516 | $ | (26,017 | ) | $ | 24,499 |
Useful life (in months) | December 31, 2016 | ||||||||||||
(in thousands) | Gross carrying value | Accumulated amortization | Net carrying value | ||||||||||
Purchased technology | 24–72 | $ | 47,001 | $ | (17,086 | ) | $ | 29,915 | |||||
IPR&D | 3,615 | — | 3,615 | ||||||||||
Total intangible assets | $ | 50,616 | $ | (17,086 | ) | $ | 33,530 |
(in thousands) | Total | ||
Year ending December 31, | |||
2018 | $ | 9,263 | |
2019 | 8,753 | ||
2020 | 4,998 | ||
2021 | 870 | ||
2022 | — | ||
$ | 23,884 |
(in thousands) | December 31, 2017 | December 31, 2016 | |||||
POP displays | $ | 16,451 | $ | 27,592 | |||
Long-term deferred tax assets | 825 | 106 | |||||
Income tax receivable | — | 33,425 | |||||
Deposits and other | 19,738 | 17,206 | |||||
Other long-term assets | $ | 37,014 | $ | 78,329 |
(in thousands) | December 31, 2017 | December 31, 2016 | |||||
Accrued payables (1) | $ | 44,582 | $ | 91,655 | |||
Employee related liabilities (1) | 24,945 | 42,577 | |||||
Accrued sales incentives | 89,549 | 40,070 | |||||
Warranty liability | 9,934 | 11,456 | |||||
Customer deposits | 8,700 | 4,381 | |||||
Income taxes payable | 1,247 | 2,756 | |||||
Purchase order commitments | 6,162 | 4,730 | |||||
Inventory received | 14,470 | 3,950 | |||||
Other | 13,441 | 9,748 | |||||
Accrued liabilities | $ | 213,030 | $ | 211,323 |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Beginning balances | $ | 11,945 | $ | 10,856 | $ | 6,405 | |||||
Charged to cost of revenue | 20,139 | 19,272 | 25,377 | ||||||||
Settlements of warranty claims | (21,711 | ) | (18,183 | ) | (20,926 | ) | |||||
Ending balances | $ | 10,373 | $ | 11,945 | $ | 10,856 |
|
(in thousands) | December 31, 2017 | |
Stock options outstanding | 9,809 | |
Restricted stock units outstanding | 9,483 | |
Common stock available for future grants | 23,071 | |
Total common stock shares reserved for issuance | 42,363 |
|
Options outstanding | ||||||||||||
Shares (in thousands) | Weighted- average exercise price | Weighted-average remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||
Outstanding at December 31, 2016 | 12,379 | $ | 12.17 | 5.97 | $ | 32,772 | ||||||
Granted | 1,848 | 9.28 | ||||||||||
Exercised | (1,329 | ) | 1.70 | |||||||||
Forfeited/Cancelled | (3,089 | ) | 18.15 | |||||||||
Outstanding at December 31, 2017 | 9,809 | $ | 11.16 | 6.00 | $ | 19,971 | ||||||
Vested and expected to vest at December 31, 2017 | 9,786 | $ | 11.15 | 6.00 | $ | 19,971 | ||||||
Exercisable at December 31, 2017 | 8,154 | $ | 10.99 | 5.45 | $ | 19,971 |
Shares (in thousands) | Weighted- average grant date fair value | |||||
Non-vested shares at December 31, 2016 | 7,970 | $ | 18.08 | |||
Granted | 8,740 | 9.40 | ||||
Vested | (3,862 | ) | 14.95 | |||
Forfeited | (3,365 | ) | 16.62 | |||
Non-vested shares at December 31, 2017 | 9,483 | $ | 11.87 |
Year ended December 31, | |||||
2017 | 2016 | 2015 | |||
Volatility | 44%–49% | 44%–45% | 43%–54% | ||
Expected term (years) | 5.3–5.8 | 5.2–6.1 | 5.5–7.0 | ||
Risk-free interest rate | 1.8%–2.1% | 1.2%–2.0% | 1.6%–2.0% | ||
Dividend yield | —% | —% | —% |
Year ended December 31, | |||||
2017 | 2016 | 2015 | |||
Volatility | 33%–36% | 43%–54% | 39%–45% | ||
Expected term (years) | 0.5 | 0.5 | 0.5 | ||
Risk-free interest rate | 0.7%–1.2% | 0.4%–0.5% | 0.1%–0.2% | ||
Dividend yield | —% | —% | —% |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Cost of revenue | $ | 1,935 | $ | 1,616 | $ | 1,492 | |||||
Research and development | 24,963 | 31,365 | 18,024 | ||||||||
Sales and marketing | 10,498 | 13,883 | 13,762 | ||||||||
General and administrative | 13,859 | 22,663 | 47,402 | ||||||||
Total stock-based compensation expense | $ | 51,255 | $ | 69,527 | $ | 80,680 |
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Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Domestic | $ | (123,325 | ) | $ | (200,595 | ) | $ | 13,562 | |||
Foreign | (53,062 | ) | (174,579 | ) | 39,023 | ||||||
$ | (176,387 | ) | $ | (375,174 | ) | $ | 52,585 |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Current | |||||||||||
Federal | $ | (1,857 | ) | $ | (2,925 | ) | $ | 18,548 | |||
State | 240 | (356 | ) | 3,007 | |||||||
Foreign | 10,631 | 8,542 | 6,539 | ||||||||
Total current | 9,014 | 5,261 | 28,094 | ||||||||
Deferred | |||||||||||
Federal | (248 | ) | 37,573 | (11,211 | ) | ||||||
State | — | 4,436 | (204 | ) | |||||||
Foreign | (2,280 | ) | (3,441 | ) | (225 | ) | |||||
Total deferred | (2,528 | ) | 38,568 | (11,640 | ) | ||||||
Income tax expense | $ | 6,486 | $ | 43,829 | $ | 16,454 |
Year ended December 31, | ||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||
(dollars in thousands) | $ | % | $ | % | $ | % | ||||||||||||||
Reconciliation to statutory rate | ||||||||||||||||||||
Tax at federal statutory rate | $ | (61,735 | ) | (35.0 | )% | $ | (131,311 | ) | (35.0 | )% | $ | 18,405 | 35.0 | % | ||||||
Change in valuation allowance | (38,016 | ) | (21.6 | ) | 101,878 | 27.2 | 8,555 | 16.3 | ||||||||||||
DTA rate change impact due to TCJA | 74,943 | 42.5 | — | — | — | — | ||||||||||||||
Impact of foreign operations | 34,039 | 19.3 | 84,491 | 22.5 | 6,434 | 12.2 | ||||||||||||||
Stock-based compensation | 12,001 | 6.8 | 15,718 | 4.2 | 2,390 | 4.5 | ||||||||||||||
State taxes, net of federal benefit | (6,469 | ) | (3.7 | ) | (14,195 | ) | (3.8 | ) | 1,454 | 2.8 | ||||||||||
Tax credits | (9,957 | ) | (5.6 | ) | (12,992 | ) | (3.5 | ) | (21,891 | ) | (41.6 | ) | ||||||||
Other | 1,680 | 1.0 | 240 | 0.1 | 1,107 | 2.1 | ||||||||||||||
Income tax provision at effective tax rate | $ | 6,486 | 3.7 | % | $ | 43,829 | 11.7 | % | $ | 16,454 | 31.3 | % |
Year ended December 31, | |||||||
(in thousands) | 2017 | 2016 | |||||
Deferred tax assets: | |||||||
Net operating loss carryforwards | $ | 113,378 | $ | 30,193 | |||
Tax credit carryforwards | 66,983 | 22,341 | |||||
Stock-based compensation | 13,055 | 26,656 | |||||
Allowance for returns | 5,452 | 6,336 | |||||
Intangible assets | 770 | — | |||||
Accruals and reserves | 18,981 | 26,587 | |||||
Total deferred tax assets | 218,619 | 112,113 | |||||
Valuation allowance | (217,884 | ) | (110,433 | ) | |||
Total deferred tax assets, net of valuation allowance | 735 | 1,680 | |||||
Deferred tax liabilities: | |||||||
Depreciation and amortization | (292 | ) | (1,714 | ) | |||
Intangible assets | — | (2,540 | ) | ||||
Total deferred tax liabilities | (292 | ) | (4,254 | ) | |||
Net deferred tax assets (liabilities) | $ | 443 | $ | (2,574 | ) |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Gross balance at January 1 | $ | 56,909 | $ | 36,273 | $ | 16,558 | |||||
Gross increase related to current year tax positions | 20,002 | 20,594 | 19,948 | ||||||||
Gross decrease related to tax rate change for current year tax positions | (2,299 | ) | — | — | |||||||
Gross increase related to prior year tax positions | — | 130 | 108 | ||||||||
Gross decrease related to prior year tax positions | (3,927 | ) | (88 | ) | (341 | ) | |||||
Gross decrease related to tax rate change for prior year tax positions | (12,101 | ) | — | — | |||||||
$ | 58,584 | $ | 56,909 | $ | 36,273 |
|
(in thousands) | Total | 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | ||||||||||||||||||||
Operating leases (1) | $ | 128,228 | $ | 22,177 | $ | 15,056 | $ | 18,244 | $ | 17,817 | $ | 16,693 | $ | 38,241 | |||||||||||||
Sponsorship commitments (2) | 7,256 | 4,487 | 2,769 | — | — | — | — | ||||||||||||||||||||
Other contractual commitments (3) | 2,766 | 2,044 | 722 | — | — | — | — | ||||||||||||||||||||
Long-term debt (4) | 175,000 | — | — | — | — | 175,000 | — | ||||||||||||||||||||
Total contractual cash obligations | $ | 313,250 | $ | 28,708 | $ | 18,547 | $ | 18,244 | $ | 17,817 | $ | 191,693 | $ | 38,241 |
|
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Accounts receivable sold | $ | 178,300 | $ | 167,769 | $ | 194,223 | |||||
Factoring fees | 1,630 | 1,266 | 1,566 |
Year ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Americas | $ | 591,879 | $ | 619,784 | $ | 868,772 | |||||
Europe, Middle East and Africa (EMEA) | 334,872 | 366,352 | 535,260 | ||||||||
Asia and Pacific (APAC) | 252,990 | 199,345 | 215,939 | ||||||||
Total revenue | $ | 1,179,741 | $ | 1,185,481 | $ | 1,619,971 |
December 31, 2017 | December 31, 2016 | ||
Customer A | 16% | 15% | |
Customer B | 32% | 27% | |
Customer C | 12% | * | |
Customer D | 11% | * |
Year ended December 31, | |||||
2017 | 2016 | 2015 | |||
Customer A | 15% | 17% | 14% | ||
Customer B | * | 11% | 12% |
|
Twelve months ended | |||||||
(in thousands) | December 31, 2017 | December 31, 2016 | |||||
Cost of revenue | $ | 634 | $ | 497 | |||
Research and development | 10,092 | 17,197 | |||||
Sales and marketing | 7,047 | 12,064 | |||||
General and administrative | 2,519 | 13,331 | |||||
Total restructuring charges | $ | 20,292 | $ | 43,089 |
(in thousands) | Severance | Other | Total | ||||||||
Restructuring liability as of December 31, 2016 | $ | 9,660 | $ | 879 | $ | 10,539 | |||||
Restructuring charges | 2,134 | 1,055 | 3,189 | ||||||||
Cash paid | (11,411 | ) | (1,884 | ) | (13,295 | ) | |||||
Non-cash reductions | 17 | — | 17 | ||||||||
Restructuring liability as of December 31, 2017 | $ | 400 | $ | 50 | $ | 450 |
(in thousands) | Severance | Other | Total | ||||||||
Restructuring liability as of December 31, 2016 | $ | — | $ | — | $ | — | |||||
Restructuring charges | 10,312 | 6,654 | 16,966 | ||||||||
Cash paid | (9,509 | ) | (151 | ) | (9,660 | ) | |||||
Non-cash reductions | (803 | ) | (2,953 | ) | (3,756 | ) | |||||
Restructuring liability as of December 31, 2017 | $ | — | $ | 3,550 | $ | 3,550 |
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