GRUBHUB INC., 10-Q filed on 5/8/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 04, 2018
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
Trading Symbol GRUB  
Entity Registrant Name GRUBHUB INC.  
Entity Central Index Key 0001594109  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   90,226,700
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
CURRENT ASSETS:    
Cash and cash equivalents $ 272,258 $ 234,090
Short-term investments 16,052 23,605
Accounts receivable, less allowances for doubtful accounts 100,129 95,970
Prepaid expenses and other current assets 9,847 6,818
Total current assets 398,286 360,483
PROPERTY AND EQUIPMENT:    
Property and equipment, net of depreciation and amortization 79,399 71,384
OTHER ASSETS:    
Other assets 6,697 6,487
Goodwill 589,862 589,862
Acquired intangible assets, net of amortization 504,011 515,553
Total other assets 1,100,570 1,111,902
TOTAL ASSETS 1,578,255 1,543,769
CURRENT LIABILITIES:    
Restaurant food liability 126,853 119,922
Accounts payable 12,202 7,607
Accrued payroll 9,897 13,186
Taxes payable 1,514 3,109
Short-term debt 4,688 3,906
Other accruals 34,237 26,818
Total current liabilities 189,391 174,548
LONG-TERM LIABILITIES:    
Deferred taxes, non-current 71,316 74,292
Other accruals 17,207 7,468
Long-term debt 143,121 169,645
Total long-term liabilities 231,644 251,405
Commitments and contingencies
STOCKHOLDERS’ EQUITY:    
Preferred Stock, $0.0001 par value. Authorized: 25,000,000 shares as of March 31, 2018 and December 31, 2017; issued and outstanding: no shares as of March 31, 2018 and December 31, 2017.
Common stock, $0.0001 par value. Authorized: 500,000,000 shares at March 31, 2018 and December 31, 2017; issued and outstanding: 87,287,041 and 86,790,624 shares as of March 31, 2018 and December 31, 2017, respectively 9 9
Accumulated other comprehensive loss (872) (1,228)
Additional paid-in capital 856,443 849,043
Retained earnings 301,640 269,992
Total Stockholders’ Equity 1,157,220 1,117,816
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,578,255 $ 1,543,769
v3.8.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2018
Dec. 31, 2017
Statement Of Financial Position [Abstract]    
Preferred Stock, par value $ 0.0001 $ 0.0001
Preferred Stock, shares authorized 25,000,000 25,000,000
Preferred Stock, shares issued 0 0
Preferred Stock, shares outstanding 0 0
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 500,000,000 500,000,000
Common stock, shares issued 87,287,041 86,790,624
Common stock, shares outstanding 87,287,041 86,790,624
v3.8.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]    
Revenues $ 232,570 $ 156,134
Costs and expenses:    
Operations and support 96,283 59,519
Sales and marketing 48,756 35,438
Technology (exclusive of amortization) 17,331 13,192
General and administrative 17,697 13,181
Depreciation and amortization 20,951 10,040
Total costs and expenses 201,018 131,370
Income from operations 31,552 24,764
Interest (income) expense - net 1,022 (221)
Income before provision for income taxes 30,530 24,985
Income tax (benefit) expense (236) 7,270
Net income attributable to common stockholders $ 30,766 $ 17,715
Net income per share attributable to common stockholders:    
Basic $ 0.35 $ 0.21
Diluted $ 0.34 $ 0.20
Weighted-average shares used to compute net income per share attributable to common stockholders:    
Basic 87,085 85,874
Diluted 90,091 87,120
v3.8.0.1
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]    
Net income $ 30,766 $ 17,715
OTHER COMPREHENSIVE INCOME    
Foreign currency translation adjustments 356 107
COMPREHENSIVE INCOME $ 31,122 $ 17,822
v3.8.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income $ 30,766 $ 17,715
Adjustments to reconcile net income to net cash from operating activities:    
Depreciation 5,050 2,412
Provision for doubtful accounts 325 95
Deferred taxes (2,976) (4,741)
Amortization of intangible assets 15,901 7,628
Stock-based compensation 10,231 7,243
Deferred rent 1,633 58
Amortization of deferred loan costs 333 124
Other (243) (234)
Change in assets and liabilities, net of the effects of business acquisitions:    
Accounts receivable 3,918 (1,721)
Prepaid expenses and other assets (3,516) 2,957
Restaurant food liability 6,885 11,297
Accounts payable 601 483
Accrued payroll (3,295) (1,534)
Other accruals 5,887 9,808
Net cash provided by operating activities 71,500 51,590
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchases of investments (10,537) (57,783)
Proceeds from maturity of investments 18,166 55,833
Capitalized website and development costs (6,262) (4,150)
Purchases of property and equipment (5,462) (3,056)
Acquisitions of businesses, net of cash acquired 737  
Acquisition of other intangible assets   (5,000)
Other cash flows from investing activities 16 91
Net cash used in investing activities (3,342) (14,065)
CASH FLOWS FROM FINANCING ACTIVITIES    
Repayments of borrowings under the credit facility (25,781)  
Proceeds from exercise of stock options 6,948 1,584
Taxes paid related to net settlement of stock-based compensation awards (11,485) (3,688)
Net cash used in financing activities (30,318) (2,104)
Net change in cash, cash equivalents, and restricted cash 37,840 35,421
Effect of exchange rates on cash, cash equivalents and restricted cash 356 97
Cash, cash equivalents, and restricted cash at beginning of year 238,239 242,214
Cash, cash equivalents, and restricted cash at end of the period 276,435 277,732
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS    
Cash paid for income taxes 227 746
Capitalized property, equipment and website and development costs in accounts payable at period end 3,992 1,956
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH    
Cash and cash equivalents 272,258 275,037
Restricted cash included in prepaid expenses and other current assets $ 1,500  
Restricted Cash, Current, Asset, Statement of Financial Position [Extensible List] us-gaap:PrepaidExpenseAndOtherAssetsCurrent  
Restricted cash included in other assets $ 2,677 $ 2,695
Restricted Cash, Noncurrent, Asset, Statement of Financial Position [Extensible List] us-gaap:OtherAssets us-gaap:OtherAssets
Cash, cash equivalents, and restricted cash at end of the period $ 276,435 $ 277,732
v3.8.0.1
Organization
3 Months Ended
Mar. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Organization

1. Organization

Grubhub Inc., a Delaware corporation, and its wholly-owned subsidiaries (collectively referred to as the “Company”) provide an online and mobile platform for restaurant pick-up and delivery orders. Diners enter their delivery address or use geo-location within the mobile applications and the Company displays the menus and other relevant information for restaurants in its network. Orders may be placed directly online, via mobile applications or over the phone at no cost to the diner. The Company charges the restaurant a per order commission that is largely fee based. In certain markets, the Company also provides delivery services to restaurants on its platform that do not have their own delivery operations.

v3.8.0.1
Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Significant Accounting Policies

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated interim financial statements include the accounts of Grubhub Inc. and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements include all wholly-owned subsidiaries and reflect all normal and recurring adjustments, as well as any other than normal adjustments, that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on February 28, 2018 (the “2017 Form 10-K”). All significant intercompany transactions have been eliminated in consolidation. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.

On January 1, 2018, the Company adopted Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning on or after January 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting guidance under ASC Topic 605. See Recently Issued Accounting Pronouncements and Note 3, Revenue, below for additional details.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, goodwill, depreciable lives of property and equipment, recoverability of intangible assets with definite lives and other long-lived assets, stock-based compensation and income taxes. Actual results could differ from these estimates.  

Changes in Accounting Principle

See “Recently Issued Accounting Pronouncements” below for a description of accounting principle changes adopted during the three months ended March 31, 2018 related to revenue and the statement of cash flows. There have been no other material changes to the Company’s significant accounting policies described in the 2017 Form 10-K.

Recently Issued Accounting Pronouncements

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. ASU 2017-09 is effective for the Company beginning in the first quarter of 2018 on a prospective basis. The adoption of ASU 2017-09 has not had and is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows with the intent of reducing diversity in practice related to eight types of cash flows including, among others, debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and separately identifiable cash flows and application of the predominance principle. In addition, in November 2016, the FASB issued Accounting Standards Update No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). ASU 2016-18 requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flow. ASU 2016-15 and ASU 2016-18 were effective for and adopted by the Company beginning in the first quarter of 2018. The amendments were applied using a retrospective transition method to each period presented and impacted the Company’s presentation of the consolidated statements of cash flows. The adoption of ASU 2016-15 and ASU 2016-18 had no material impact on the Company’s consolidated financial position, results of operations or cash flows as the Company’s restricted cash balances are immaterial.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables and held-to-maturity debt securities, which will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands disclosure requirements. ASU 2016-13 is effective for the Company beginning the first quarter of 2020 and early adoption is permitted. The guidance will be applied using the modified-retrospective approach. The adoption of ASU 2016-13 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. The recognition, measurement, and presentation of expenses and cash flows arising from a lease under ASU 2016-02 will not significantly change from current GAAP. ASU 2016-02 is effective beginning in the first quarter of 2019 with early adoption permitted. The Company will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of adoption of ASU 2016-02 on its consolidated financial statements and anticipates that it will result in a significant increase in its long-term assets and liabilities but will have no material impact to its results of operations and cash flows.     

In May 2014, and in subsequent updates, the FASB issued ASC Topic 606, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASC Topic 606 establishes a five-step revenue recognition process in which an entity 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. ASC Topic 606 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. ASC Topic 606 was effective for and adopted by the Company in the first quarter of 2018. The Company applied the modified retrospective approach to contracts which were not completed as of January 1, 2018. The adoption of these ASUs did not have and is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows or its business processes, systems and controls.

The adoption of ASC Topic 606 resulted in an increase in revenues of $0.6 million for the three months ended March 31, 2018 and primarily had the following impact on the Company’s financial statements:

 

Beginning in January 1, 2018, the Company defers the incremental costs of obtaining contracts as contract acquisition assets resulting in a $2.0 million decrease in sales and marketing expense in the condensed consolidated statements of operations and corresponding increase in other assets on the condensed consolidated balance sheets. Contract acquisition assets are amortized to sales and marketing expense in the consolidated statements of operations over the period in which services are expected to be provided to the customer, which is estimated to be approximately 4 years. Prior to the adoption of ASC Topic 606, the cost of obtaining a contract was recognized as it was incurred.

 

Beginning in the first quarter of 2018, the Company recognizes revenue from estimated unredeemed gift cards that are not subject to unclaimed property laws over the expected customer redemption period, rather than when the likelihood of redemption became remote. The Company recorded a cumulative-effect adjustment to opening retained earnings as of January 1, 2018 of $0.9 million related to unredeemed gift cards, breakage income of $0.4 million in revenues in the condensed consolidated statements of operations during the three months ended March 31, 2018 and a corresponding increase in other accruals of $1.3 million on the condensed consolidated balance sheets.

 

Changes in the timing of revenue recognition under ASC Topic 606 related to incentives, refunds and adjustments also resulted in a $0.2 million increase in revenues on the condensed consolidated statements of operations during the three months ended March 31, 2018.

 

The adoption of ASC Topic 606 had no impact to the Company’s total net cash provided by or used in operations, investing or financing activities within the Company’s condensed consolidated statement of cash flows for the three months ended March 31, 2018.

See Note 3, Revenue, for additional details.

v3.8.0.1
Revenue
3 Months Ended
Mar. 31, 2018
Revenue From Contract With Customer [Abstract]  
Revenue

3. Revenue

Revenues are recognized when control of the promised goods or services is transferred to the customer, in the amount that reflects the consideration the Company expects to receive in exchange for those good or services.

The Company generates revenues primarily when diners place an order on the platform through its mobile applications, its websites, or through third-party websites that incorporate the Company’s API or one of the Company’s listed phone numbers. Restaurants pay a commission, typically a percentage of the transaction, on orders that are processed through the platform. Most of the restaurants on the Company’s platform can choose their level of commission rate, at or above a base rate. A restaurant can choose to pay a higher rate that affects its prominence and exposure to diners on the platform. Additionally, restaurants that use the Company’s delivery services pay an additional commission for the use of those services. The Company may also charge a delivery fee directly to the diner.

Revenues from online and phone pick-up and delivery orders are recognized when the orders are transmitted to the restaurants, including revenues for managed delivery services due to the simultaneous nature of the Company’s delivery operations. The amount of revenue recognized by the Company is based on the arrangement with the related restaurant and is adjusted for any expected refunds or adjustments based on historical experience and any cash credits related to the transaction, including incentive offers provided to restaurants and diners. The Company also recognizes as revenue any fees charged to the diner for delivery services provided by the Company. Although the Company processes and collects the entire amount of the transaction with the diner, it records revenue for transmitting orders to restaurants on a net basis because the Company is acting as an agent for takeout orders, which are prepared by the restaurants. The Company is the principal in the transaction with respect to credit card processing and managed delivery services because it controls the respective services. As a result, costs incurred for processing the credit card transactions and providing delivery services are included in operations and support expense in the consolidated statements of operations.

The Company periodically provides incentive offers to restaurants and diners to use our platform. These promotions are generally cash credits to be applied against purchases. These incentive offers are recorded as a reduction in revenues, generally on the date the corresponding order revenue is recognized. For those incentives related to current orders that create an obligation to discount future orders, the Company allocates the incentives that are expected to be redeemed proportionally to current and future orders based on their relative expected transaction prices.  

For most orders, diners use a credit card to pay for their meal when the order is placed. For these transactions, the Company collects the total amount of the diner’s order net of payment processing fees from the payment processor and remits the net proceeds to the restaurant less commission. The Company generally accumulates funds and remits the net proceeds to the restaurants on at least a monthly basis, depending on the payment terms with the restaurant. The Company also accepts payment for orders via gift cards offered on its platform. For gift cards that are not subject to unclaimed property laws, the Company recognizes revenue from estimated unredeemed gift cards, based on its historical breakage experience, over the expected customer redemption period.

Certain governmental taxes are imposed on the products and services provided through the Company’s platform and are included in the order fees charged to the diner and collected by the Company. Sales taxes are either remitted to the restaurant for payment or are paid directly to certain states. These fees are recorded on a net basis, and, as a result, are excluded from revenues.

The Company also generates a small amount of revenues directly from companies that participate in our corporate ordering program and also by selling advertising to third parties on our allmenus.com and MenuPages.com websites. The Company does not anticipate that the foregoing will generate a material portion of our revenues in the foreseeable future.

Accounts Receivable

Accounts receivable primarily represent the net cash due from the Company’s payment processor for cleared transactions and amounts owed from corporate customers, which are generally invoiced on a monthly basis. The carrying amount of the Company’s receivables is reduced by an allowance for doubtful accounts that reflects management’s best estimate of amounts that will not be collected based on historical loss experience and any current or forecasted specific risks.

Deferred Revenues

The Company’s deferred revenues consist primarily of gift card liabilities and certain incentive liabilities. These amounts are included within other accruals on the consolidated balance sheets and are not material to the Company’s consolidated financial position. The majority of gift cards and incentives issued by the Company are redeemed within a year.

Contract Acquisition Costs

The Company defers the incremental costs of obtaining contracts including certain commissions and bonuses and related payroll taxes as contract acquisition assets within other assets on the consolidated balance sheets. Contract acquisition assets are amortized using the straight-line method to sales and marketing expense in the consolidated statements of operations over the useful life of the contract, which is estimated to be approximately 4 years. During the three months ended March 31, 2018, the Company deferred $2.1 million of contract acquisitions costs and amortized $0.1 million of related expense in the same period.

v3.8.0.1
Acquisitions
3 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Acquisitions

4. Acquisitions

There were no acquisitions during the three months ended March 31, 2018.  

2017 Acquisitions

On October 10, 2017, the Company acquired all of the issued and outstanding equity interests of Eat24, LLC (“Eat24”), a wholly owned subsidiary of Yelp Inc., for approximately $281.8 million, including $281.4 million in net cash paid and $0.3 million of other non-cash consideration. Of such amount, $28.8 million will be held in escrow for an 18-month period after closing to secure the Company’s indemnification rights under the purchase agreement. Eat24 provides online and mobile food ordering for restaurants and diners across the United States. The acquisition expanded the breadth and depth of the Company’s national network of restaurant partners and active diners.

The Company granted RSU awards to acquired Eat24 employees in replacement of their unvested equity awards as of the closing date. Approximately $0.3 million of the fair value of the replacement RSU awards granted to acquired Eat24 employees was attributable to the pre-combination services of the Eat24 awardees and was included in the $281.8 million purchase price. This amount is reflected within goodwill in the purchase price allocation. As of the acquisition date, post-combination expense of approximately $4.1 million is expected to be recognized related to the replacement awards over the remaining post-combination service period.

On August 23, 2017, the Company acquired substantially all of the assets and certain expressly specified liabilities of A&D Network Solutions, Inc. and Dashed, Inc. (collectively, “Foodler”). The purchase price for Foodler was $51.2 million in cash, net of cash acquired of $0.1 million. Foodler is an independent online food-ordering company with an established diner base in the Northeast United States. The acquisition expanded the breadth and depth of the Company’s restaurant network, active diners and delivery network.

The results of operations of Eat24 and Foodler have been included in the Company’s financial statements since October 10, 2017 and August 23, 2017, respectively.

The excess of the consideration transferred in the acquisitions over the net amounts assigned to the fair value of the assets were recorded as goodwill, which represents the value of increasing the breadth and depth of the Company’s network of restaurants and diners. The total goodwill related to this acquisitions of Eat24 and Foodler of $153.4 million is expected to be deductible for income tax purposes.

The assets acquired and liabilities assumed of Eat24 and Foodler were recorded at their estimated fair values as of the closing dates of October 10, 2017 and August 23, 2017. The following table summarizes the final purchase price allocation acquisition-date fair values of the assets and liabilities acquired in connection with the Eat24 and Foodler acquisitions:

 

Eat24

 

 

Foodler

 

 

Total

 

 

(in thousands)

 

Cash

$

40

 

 

$

86

 

 

$

126

 

Accounts receivable

 

8,267

 

 

 

307

 

 

 

8,574

 

Prepaid expenses and other current assets

 

221

 

 

 

 

 

 

221

 

Property and equipment

 

1,113

 

 

 

 

 

 

1,113

 

Restaurant relationships

 

126,232

 

 

 

35,217

 

 

 

161,449

 

Diner acquisition

 

35,226

 

 

 

1,354

 

 

 

36,580

 

Trademarks

 

2,225

 

 

 

74

 

 

 

2,299

 

Developed technology

 

2,559

 

 

 

1,955

 

 

 

4,514

 

Goodwill

 

135,955

 

 

 

17,452

 

 

 

153,407

 

Accounts payable and accrued expenses

 

(30,082

)

 

 

(5,237

)

 

 

(35,319

)

Total purchase price plus cash acquired

 

281,756

 

 

 

51,208

 

 

 

332,964

 

Fair value of replacement RSUs attributable to pre-combination service

 

(274

)

 

 

 

 

 

(274

)

Cash acquired

 

(40

)

 

 

(86

)

 

 

(126

)

Net cash paid

$

281,442

 

 

$

51,122

 

 

$

332,564

 

 

Additional Information

The estimated fair values of the intangible assets acquired were determined based on a combination of the income, cost, and market approaches to measure the fair value of the restaurant relationships, diner acquisition, developed technology and trademarks. The fair value of the trademarks was measured based on the relief from royalty method. The cost approach, specifically the cost to recreate method, was used to value the developed technology and diner acquisition. The income approach, specifically the multi-period excess earnings method, was used to value the restaurant relationships. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy.

The Company incurred certain expenses directly and indirectly related to acquisitions which were recognized in general and administrative expenses within the condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017 of $1.3 million and $0.4 million, respectively.

Pro Forma

The following unaudited pro forma information presents a summary of the operating results of the Company for the three months ended March 31, 2017 as if the acquisitions of Eat24 and Foodler had occurred as of January 1 of the year prior to acquisition:

 

 

 

 

 

Three Months Ended

March 31, 2017

 

 

(in thousands, except per share data)

 

Revenues

$

177,650

 

Net income

 

12,125

 

Net income per share attributable to common shareholders:

 

 

 

Basic

$

0.14

 

Diluted

$

0.14

 

 

The pro forma adjustments that reflect the amortization that would have been recognized for intangible assets, elimination of transaction costs incurred, stock-based compensation expense for replacement awards, interest expense for transaction financings and other adjustments, as well as the pro forma tax impact of such adjustments for the three months ended March 31, 2017 were as follows:

 

 

 

 

 

Three Months Ended

March 31, 2017

 

 

(in thousands)

 

Depreciation and amortization

$

3,623

 

Transaction costs

 

(409

)

Stock-based compensation

 

(626

)

Interest expense

 

1,217

 

Other

 

1,367

 

Income tax benefit

 

(2,146

)

 

The unaudited pro forma revenues and net income are not intended to represent or be indicative of the Company’s condensed consolidated results of operations or financial condition that would have been reported had the acquisitions been completed as of the beginning of the periods presented and should not be taken as indicative of the Company’s future consolidated results of operations or financial condition.

v3.8.0.1
Marketable Securities
3 Months Ended
Mar. 31, 2018
Investments Debt And Equity Securities [Abstract]  
Marketable Securities

5. Marketable Securities

The amortized cost, unrealized gains and losses and estimated fair value of the Company’s held-to-maturity marketable securities as of March 31, 2018 and December 31, 2017 were as follows:

 

 

 

March 31, 2018

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

46,599

 

 

$

 

 

$

(66

)

 

$

46,533

 

Corporate bonds

 

 

2,475

 

 

 

 

 

 

 

 

 

2,475

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

12,556

 

 

 

 

 

 

(60

)

 

 

12,496

 

Corporate bonds

 

 

3,496

 

 

 

 

 

 

(3

)

 

 

3,493

 

Total

 

$

65,126

 

 

$

 

 

$

(129

)

 

$

64,997

 

 

 

 

December 31, 2017

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

39,979

 

 

$

 

 

$

(43

)

 

$

39,936

 

Corporate bonds

 

 

1,250

 

 

 

 

 

 

 

 

 

1,250

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

21,480

 

 

 

 

 

 

(99

)

 

 

21,381

 

Corporate bonds

 

 

2,125

 

 

 

 

 

 

(1

)

 

 

2,124

 

Total

 

$

64,834

 

 

$

 

 

$

(143

)

 

$

64,691

 

 

All of the Company’s marketable securities were classified as held-to-maturity investments and have maturities within one year of March 31, 2018.

The gross unrealized losses, estimated fair value and length of time the individual marketable securities were in a continuous loss position for those marketable securities in an unrealized loss position as of March 31, 2018 and December 31, 2017 were as follows:

 

 

 

March 31, 2018

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Estimated Fair Value

 

 

Unrealized Loss

 

 

Estimated Fair Value

 

 

Unrealized Loss

 

 

Estimated Fair Value

 

 

Unrealized Loss

 

 

 

(in thousands)

 

Commercial paper

 

$

59,029

 

 

$

(126

)

 

$

 

 

$

 

 

$

59,029

 

 

$

(126

)

Corporate bonds

 

 

3,493

 

 

 

(3

)

 

 

 

 

 

 

 

 

3,493

 

 

 

(3

)

Total

 

$

62,522

 

 

$

(129

)

 

$

 

 

$

 

 

$

62,522

 

 

$

(129

)

 

 

 

December 31, 2017

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Estimated Fair Value

 

 

Unrealized Loss

 

 

Estimated Fair Value

 

 

Unrealized Loss

 

 

Estimated Fair Value

 

 

Unrealized Loss

 

 

 

(in thousands)

 

Commercial paper

 

$

61,317

 

 

$

(142

)

 

$

 

 

$

 

 

$

61,317

 

 

$

(142

)

Corporate bonds

 

 

3,374

 

 

 

(1

)

 

 

 

 

 

 

 

 

3,374

 

 

 

(1

)

Total

 

$

64,691

 

 

$

(143

)

 

$

 

 

$

 

 

$

64,691

 

 

$

(143

)

 

The Company recognized interest income during the three months ended March 31, 2018 and 2017 of $0.6 million and $0.4 million, respectively, within net interest (income) expense on the condensed consolidated statements of operations. During the three months ended March 31, 2018 and 2017, the Company did not recognize any other-than-temporary impairment losses related to its marketable securities.

The Company’s marketable securities are classified within Level 2 of the fair value hierarchy (see Note 14, Fair Value Measurement, for further details).

v3.8.0.1
Goodwill and Acquired Intangible Assets
3 Months Ended
Mar. 31, 2018
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Acquired Intangible Assets

6. Goodwill and Acquired Intangible Assets

The components of acquired intangible assets as of March 31, 2018 and December 31, 2017 were as follows:

 

 

 

March 31, 2018

 

 

December 31, 2017

 

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

 

(in thousands)

 

Restaurant relationships

 

$

457,580

 

 

$

(83,332

)

 

$

374,248

 

 

$

457,580

 

 

$

(76,852

)

 

$

380,728

 

Diner acquisition

 

 

40,247

 

 

 

(3,918

)

 

 

36,329

 

 

 

40,247

 

 

 

(1,906

)

 

 

38,341

 

Developed technology

 

 

8,523

 

 

 

(8,224

)

 

 

299

 

 

 

8,523

 

 

 

(6,418

)

 

 

2,105

 

Trademarks

 

 

2,225

 

 

 

(847

)

 

 

1,378

 

 

 

2,225

 

 

 

(402

)

 

 

1,823

 

Other

 

 

6,131

 

 

 

(4,050

)

 

 

2,081

 

 

 

6,888

 

 

 

(4,008

)

 

 

2,880

 

Total amortizable intangible assets

 

 

514,706

 

 

 

(100,371

)

 

 

414,335

 

 

 

515,463

 

 

 

(89,586

)

 

 

425,877

 

Indefinite-lived trademarks

 

 

89,676

 

 

 

 

 

 

89,676

 

 

 

89,676

 

 

 

 

 

 

89,676

 

Total acquired intangible assets

 

$

604,382

 

 

$

(100,371

)

 

$

504,011

 

 

$

605,139

 

 

$

(89,586

)

 

$

515,553

 

Amortization expense for acquired intangible assets was $11.5 million and $5.3 million for the three months ended March 31, 2018 and 2017, respectively.

 

There were no changes in the carrying amount of goodwill during the three months ended March 31, 2018.

 

Estimated future amortization expense of acquired intangible assets as of March 31, 2018 was as follows:

 

 

 

(in thousands)

 

The remainder of 2018

 

 

27,997

 

2019

 

 

33,598

 

2020

 

 

32,254

 

2021

 

 

32,254

 

2022

 

 

30,292

 

Thereafter

 

 

257,940

 

Total

 

$

414,335

 

 

v3.8.0.1
Property and Equipment
3 Months Ended
Mar. 31, 2018
Property Plant And Equipment [Abstract]  
Property and Equipment

7. Property and Equipment

The components of the Company’s property and equipment as of March 31, 2018 and December 31, 2017 were as follows:

 

 

 

March 31, 2018

 

 

December 31, 2017

 

 

 

(in thousands)

 

Developed software

 

$

58,600

 

 

$

52,041

 

Computer equipment

 

 

36,445

 

 

 

31,601

 

Leasehold improvements

 

 

24,307

 

 

 

23,400

 

Furniture and fixtures

 

 

6,932

 

 

 

6,857

 

Purchased software and digital assets

 

 

2,917

 

 

 

2,881

 

Construction in progress

 

 

2,946

 

 

 

 

Property and equipment

 

 

132,147

 

 

 

116,780

 

Accumulated amortization and depreciation

 

 

(52,748

)

 

 

(45,396

)

Property and equipment, net

 

$

79,399

 

 

$

71,384

 

The Company recorded depreciation and amortization expense for property and equipment other than developed software of $5.1 million and $2.3 million for the three months ended March 31, 2018 and 2017, respectively.

The gross carrying amount and accumulated amortization of the Company’s developed software assets as of March 31, 2018 were adjusted by $1.7 million for certain fully amortized assets that were no longer in use. The Company capitalized developed software costs of $8.2 million and $5.7 million for the three months ended March 31, 2018 and 2017, respectively. Amortization expense for developed software costs, recognized in depreciation and amortization in the condensed consolidated statements of operations, for the three months ended March 31, 2018 and 2017 was $4.4 million and $2.4 million, respectively.

v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

8. Commitments and Contingencies

Legal

In August 2011, Ameranth, Inc. (“Ameranth”) filed a patent infringement action against a number of defendants, including Grubhub Holdings Inc., in the U.S. District Court for the Southern District of California (the “Court”), Case No. 3:11-cv-1810 (“’1810 action”).

In March 2012, Ameranth initiated eight additional actions for infringement of a related patent, U.S. Patent No. 8,146,077 (“’077 patent”), in the same forum, including separate actions against Grubhub Holdings Inc., Case No. 3:12-cv-739 (“’739 action”), and Seamless North America, LLC, Case No. 3:12-cv-737 (“’737 action”). In August 2012, the Court severed the claims against Grubhub Holdings Inc. and Seamless North America, LLC in the ’1810 action and consolidated them with the ’739 action and the ’737 action, respectively. Later, the Court consolidated these separate cases against Grubhub Holdings Inc. and Seamless North America, LLC, along with the approximately 40 other cases Ameranth filed in the same district, with the original ’1810 action. In their answers, Grubhub Holdings Inc. and Seamless North America, LLC denied infringement and interposed various defenses, including non-infringement, invalidity, unenforceability and inequitable conduct.

The consolidated district court case was stayed until January 2017, when Ameranth’s motion to lift the stay and proceed on only the ‘077 patent was granted. The court set a jury trial date of December 3, 2018 for the claims against Grubhub Holdings Inc. and Seamless North America, LLC. The Company believes this case lacks merit and that it has strong defenses to all of the infringement claims. The Company intends to defend the suit vigorously. However, the Company is unable to predict the likelihood of success of Ameranth’s infringement claims and is unable to predict the likelihood of success of its counterclaims. The Company has not recorded an accrual related to this lawsuit as of March 31, 2018, as it does not believe a material loss is probable. It is a reasonable possibility that a loss may be incurred; however, the possible range of loss is not estimable given the status of the case and the uncertainty as to whether the claims at issue are with or without merit, will be settled out of court, or will be determined in the Company’s favor, whether the Company may be required to expend significant management time and financial resources on the defense of such claims, and whether the Company will be able to recover any losses under its insurance policies.

In addition to the matter described above, from time to time, the Company is involved in various other legal proceedings arising from the normal course of business activities, including labor and employment claims, some of which relate to the alleged misclassification of independent contractors. In September 2015, a claim was brought in the United States District Court for the Northern District of California under the Private Attorneys General Act by an individual plaintiff on behalf of himself and seeking to represent other drivers and the State of California. The claim sought monetary penalties and injunctive relief for alleged violations of the California Labor Code based on the alleged misclassification of drivers as independent contractors. A decision was issued on February 8, 2018, and the court ruled in favor of the Company, finding that plaintiff was properly classified as an independent contractor. In March 2018, the plaintiff appealed this decision to the Ninth Circuit. The Company does not believe any of the foregoing claims will have a material impact on its consolidated financial statements. However, there is no assurance that any claim will not be combined into a collective or class action.

Indemnification

In connection with the merger of Seamless North America, LLC, Seamless Holdings Corporation and Grubhub Holdings Inc. in August 2013, the Company agreed to indemnify Aramark Holdings Corporation for negative income tax consequences associated with the October 2012 spin-off of Seamless Holdings Corporation that were the result of certain actions taken by the Company through October 29, 2014, in certain instances subject to a $15.0 million limitation. Management is not aware of any actions that would impact the indemnification obligation.

v3.8.0.1
Debt
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Debt

9. Debt

The following table summarizes the carrying value of the Company’s debt as of March 31, 2018 and December 31, 2017:

 

 

March 31, 2018

 

 

December 31, 2017

 

 

 

(in thousands)

 

Term loan

 

$

123,438

 

 

$

124,219

 

Revolving loan

 

 

25,000

 

 

 

50,000

 

Total debt

 

 

148,438

 

 

 

174,219

 

Less current portion

 

 

(4,688

)

 

 

(3,906

)

Less unamortized deferred debt issuance costs

 

 

(629

)

 

 

(668

)

Long-term debt

 

$

143,121

 

 

$

169,645

 

On October 10, 2017, the Company entered into a credit agreement which provides, among other things, for aggregate revolving loans up to $225 million and term loans in an aggregate principal amount of $125 million (the “Credit Agreement”). In addition, the Company may incur up to $150 million of incremental revolving loans or incremental revolving term loans pursuant to the terms and conditions of the Credit Agreement. The credit facility will be available to the Company until October 9, 2022. There have been no changes in the terms of the Credit Agreement during the three months ended March 31, 2018.

During the three months ended March 31, 2018, the Company made principal payments of $25.8 million from cash flows from operations. As of March 31, 2018, outstanding borrowings under the Credit Agreement were $148.4 million.  The fair value of the Company’s outstanding debt approximates its carrying value as of March 31, 2018 (see Note 14, Fair Value Measurement, for additional details). The Company was in compliance with the covenants of the Credit Agreement as of March 31, 2018. Additional capacity on the Credit Agreement may be used for general corporate purposes, including funding working capital and future acquisitions.

  As of March 31, 2018, total unamortized debt issuance costs of $2.3 million were recorded as other assets and as a reduction of long-term debt on the consolidated balance sheets in proportion to the borrowing capacities of the revolving and term loans.

Interest expense includes interest on outstanding borrowings, amortization of debt issuance costs and commitment fees on the undrawn portion available under the credit facility. During the three months ended March 31, 2018 and 2017, the Company recognized interest expense of $1.6 million and $0.2 million, respectively.

v3.8.0.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

10. Stock-Based Compensation

The Company has granted stock options, restricted stock units and restricted stock awards under its incentive plans. The Company recognizes compensation expense based on estimated grant date fair values for all stock-based awards issued to employees and directors, including stock options, restricted stock awards and restricted stock units.

Stock-based Compensation Expense

The total stock-based compensation expense related to all stock-based awards was $10.2 million and $7.2 million during the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, $160.5 million of total unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of 3.2 years.

Excess tax benefits reflect the total realized value of the Company’s tax deductions from individual stock option exercise transactions and the vesting of restricted stock awards and restricted stock units in excess of the deferred tax assets that were previously recorded. During the three months ended March 31, 2018 and 2017, the Company recognized excess tax benefits from stock-based compensation of $8.2 million and $1.9 million within income tax (benefit) expense on the condensed consolidated statements of operations and within cash flows from operating activities on the condensed consolidated statements of cash flows.

The Company capitalized $1.7 million and $0.9 million during the three months ended March 31, 2018 and 2017, respectively, of stock-based compensation expense as website and software development costs.

Stock Options

The Company granted 332,723 and 592,859 stock options during the three months ended March 31, 2018 and 2017, respectively. The fair value of each stock option award was estimated based on the assumptions below as of the grant date using the Black-Scholes-Merton option pricing model. Beginning in the first quarter of 2018, expected volatilities are based on the historical and implied volatilities of the Company’s own common stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term calculation for option awards considers a combination of the Company’s historical and estimated future exercise behavior. The risk-free rate for the period within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions used to determine the fair value of the stock options granted during the three months ended March 31, 2018 and 2017 were as follows: 

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Weighted-average fair value options granted

 

$

33.24

 

 

$

15.10

 

Average risk-free interest rate

 

 

2.38

%

 

 

1.65

%

Expected stock price volatilities (a)

 

 

45.7

%

 

 

48.8

%

Dividend yield

 

None

 

 

None

 

Expected stock option life (years)

 

 

4.00

 

 

 

4.00

 

 

 

(a)

Prior to the first quarter of 2018, the expected volatility was based on a combination of the historical and implied volatilities of comparable publicly-traded companies and the historical volatility of the Company’s own common stock due to its limited trading history as there was no active external or internal market for the Company’s common stock prior to the Company’s initial public offering in April 2014.

 

Stock option awards as of December 31, 2017 and March 31, 2018, and changes during the three months ended March 31, 2018, were as follows

 

 

Options

 

 

Weighted-Average

Exercise Price

 

 

Aggregate Intrinsic

Value

(thousands)

 

 

Weighted-Average

Exercise Term

(years)

 

Outstanding at December 31, 2017

 

 

2,705,849

 

 

$

25.53

 

 

$

125,197

 

 

 

7.28

 

Granted

 

 

332,723

 

 

 

86.70

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(109,203

)

 

 

34.14

 

 

 

 

 

 

 

 

 

Exercised

 

 

(252,302

)

 

 

27.54

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2018

 

 

2,677,067

 

 

 

32.59

 

 

 

184,388

 

 

 

7.37

 

Vested and expected to vest at March 31, 2018

 

 

2,669,921

 

 

 

32.51

 

 

 

184,126

 

 

 

7.37

 

Exercisable at March 31, 2018

 

 

1,339,146

 

 

$

20.56

 

 

$

108,354

 

 

 

6.39

 

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the fair value of the common stock and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on each date. This amount will change in future periods based on the fair value of the Company’s stock and the number of options outstanding. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2018 and 2017 was $14.6 million and $2.2 million, respectively.

The Company recorded compensation expense for stock options of $2.4 million and $2.9 million for the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, total unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options was $23.6 million and is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock Units

Non-vested restricted stock units as of December 31, 2017 and March 31, 2018, and changes during the three months ended March 31, 2018 were as follows:

 

 

 

Restricted Stock Units

 

 

 

Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

Outstanding at December 31, 2017

 

 

2,454,801

 

 

$

37.56

 

Granted

 

 

839,668

 

 

 

86.79

 

Forfeited

 

 

(103,157

)

 

 

40.20

 

Vested

 

 

(391,586

)

 

 

35.41

 

Outstanding at March 31, 2018

 

 

2,799,726

 

 

$

52.52

 

 

Compensation expense related to restricted stock units was $7.8 million and $4.3 million during the three months ended March 31, 2018 and 2017, respectively. The aggregate fair value as of the vest date of restricted stock units that vested during the three months ended March 31, 2018 and 2017 was $30.3 million and $9.5 million, respectively. As of March 31, 2018, $136.9 million of total unrecognized compensation cost, adjusted for estimated forfeitures, related to 2,772,059 non-vested restricted stock units expected to vest with weighted-average grant date fair values of $52.25 is expected to be recognized over a weighted-average period of 3.3 years. The fair value of these awards was determined based on the Company’s stock price at the grant date and assumes no expected dividend payments through the vesting period.

v3.8.0.1
Income Taxes
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

11. Income Taxes

During the three months ended March 31, 2018 and 2017, the Company’s effective tax rate was negative 0.8% and positive 29.1%, respectively. The income tax (benefit) expense during the three months ended March 31, 2018 and 2017 included the net impact of excess tax benefits for stock-based compensation of $8.2 million and $1.9 million, respectively (see Note 10, Stock-based Compensation, for additional details).

The Company is currently under examination in New York for corporate income tax returns for the tax years ended December 31, 2014, 2015 and 2016. The Company does not believe, but cannot predict with certainty, that there will not be any additional tax liabilities, penalties and/or interest as a result of the audit.

v3.8.0.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Stockholders' Equity

12. Stockholders’ Equity

As of March 31, 2018 and December 31, 2017, the Company was authorized to issue two classes of stock: common stock and preferred stock.

Common Stock

Each holder of common stock has one vote per share of common stock held on all matters that are submitted for stockholder vote. At March 31, 2018 and December 31, 2017, there were 500,000,000 shares of common stock authorized. At March 31, 2018 and December 31, 2017, there were 87,287,041 and 86,790,624 shares issued and outstanding, respectively. The Company did not hold any shares as treasury shares as of March 31, 2018 or December 31, 2017.

 

On January 22, 2016, the Company’s Board of Directors approved a program that authorizes the repurchase of up to $100 million of the Company’s common stock exclusive of any fees, commissions or other expenses relating to such repurchases through open market purchases or privately negotiated transactions at the prevailing market price at the time of purchase. The repurchase program was announced on January 25, 2016. The repurchased stock may be retired or held as authorized but unissued treasury shares. The repurchase authorizations do not obligate the Company to acquire any particular amount of common stock or adopt any particular method of repurchase and may be modified, suspended or terminated at any time at management’s discretion. Repurchased and retired shares will result in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted net income per share at the time of the transaction. During the three months ended March 31, 2018, the Company did not repurchase any shares of its common stock.

Preferred Stock

The Company was authorized to issue 25,000,000 shares of preferred stock. There were no issued or outstanding shares of preferred stock as of March 31, 2018 or December 31, 2017.

The Company’s equity as of December 31, 2017 and March 31, 2018, and changes during the three months ended March 31, 2018, were as follows:

 

 

 

(in thousands)

 

Balance at December 31, 2017

 

$

1,117,816

 

Net income

 

 

30,766

 

Cumulative effect of change in accounting principle(a)

 

 

882

 

Currency translation

 

 

356

 

Stock-based compensation

 

 

11,937

 

Shares repurchased and retired to satisfy tax withholding upon vesting

 

 

(11,485

)

Stock option exercises, net of withholdings and other

 

 

6,948

 

Balance at March 31, 2018

 

$

1,157,220

 

 

(a)

See Note 2, Significant Accounting Policies, for additional details related to the impact of the adoption of ASC Topic 606 during the three months ended March 31, 2018.

v3.8.0.1
Earnings Per Share Attributable to Common Stockholders
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Earnings Per Share Attributable to Common Stockholders

13. Earnings Per Share Attributable to Common Stockholders

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration for common stock equivalents. Diluted net income per share attributable to common stockholders is computed by dividing net income by the weighted-average number of common shares outstanding during the period and potentially dilutive common stock equivalents, including stock options and restricted stock units, except in cases where the effect of the common stock equivalent would be antidilutive. Potential common stock equivalents consist of common stock issuable upon exercise of stock options and vesting of restricted stock units using the treasury stock method.

The following tables present the calculation of basic and diluted net income per share attributable to common stockholders for the three months ended March 31, 2018 and 2017:

 

Three Months Ended

March 31, 2018

 

 

Three Months Ended

March 31, 2017

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

(in thousands, except per share data)

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

30,766

 

 

 

87,085

 

 

$

0.35

 

 

$

17,715

 

 

 

85,874

 

 

$

0.21