Document and Entity Information

3 Months Ended

Mar. 31, 2017

May 8, 2017

Class A Common Stock [Member]

May 8, 2017

Class B Common Stock [Member]

Document Information [Line Items]

Document Type

10-Q

Amendment Flag

false

Document Period End Date

Mar. 31, 2017

Document Fiscal Year Focus

2017

Document Fiscal Period Focus

Q1

Trading Symbol

AYX

Entity Registrant Name

Alteryx, Inc.

Entity Central Index Key

0001689923

Current Fiscal Year End Date

--12-31

Entity Filer Category

Non-accelerated Filer

Entity Common Stock, Shares Outstanding

10,350,000

47,998,489

Condensed Consolidated Statements of Operations and Comprehensive Loss (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

Mar. 31, 2017

Mar. 31, 2016

Income Statement [Abstract]

Revenue

$ 28,545

$ 18,394

Cost of revenue

4,826

3,899

Gross profit

23,719

14,495

Operating expenses:

Research and development

6,022

3,855

Sales and marketing

15,628

13,630

General and administrative

7,683

3,416

Total operating expenses

29,333

20,901

Loss from operations

(5,614)

(6,406)

Other income (expense), net

97

(90)

Loss before provision for income taxes

(5,517)

(6,496)

Provision for income taxes

150

37

Net loss

(5,667)

(6,533)

Less: Accretion of Series A redeemable convertible preferred stock

(1,983)

(1,278)

Net loss attributable to common stockholders

(7,650)

(7,811)

Net loss per share attributable to common stockholders, basic and diluted

$ (0.22)

$ (0.24)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

35,126

32,266

Net loss

(5,667)

(6,533)

Other comprehensive income (loss), net of tax:

Net unrealized holding gain (loss) on investments, net of tax

(11)

64

Foreign currency translation adjustments, net of tax

(48)

Other comprehensive income (loss), net of tax

(59)

64

Total comprehensive loss

$ (5,726)

$ (6,469)

Condensed Consolidated Balance Sheets (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2017

Dec. 31, 2016

Current assets:

Cash and cash equivalents

$ 141,586

$ 31,306

Short-term investments

22,902

21,394

Accounts receivable, net

24,061

35,367

Deferred commissions

6,513

7,358

Prepaid expenses and other current assets

5,361

5,013

Total current assets

200,423

100,438

Property and equipment, net

6,539

6,212

Long-term investments

5,992

Goodwill

2,895

Intangible assets, net

3,035

Other assets

4,790

4,765

Total assets

223,674

111,415

Current liabilities:

Accounts payable

1,950

1,780

Accrued payroll and payroll related liabilities

4,163

7,760

Accrued expenses and other current liabilities

8,120

4,987

Deferred revenue

70,494

71,050

Total current liabilities

84,727

85,577

Deferred revenue

3,505

3,084

Other liabilities

2,664

1,182

Total liabilities

90,896

89,843

Commitments and contingencies (Note 7)

Redeemable convertible preferred stock, $0.0001 par value: no shares and 14,899 shares authorized as of March 31, 2017 and December 31, 2016, respectively; no shares and 14,647 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively; aggregate liquidation preference of $0 and $87,448 as of March 31, 2017 and December 31, 2016, respectively

99,182

Stockholders' equity (deficit):

Preferred stock, $0.0001 par value, 10,000 and no shares authorized as of March 31, 2017 and December 31, 2016, respectively; no shares issued and outstanding as of March 31, 2017 and December 31, 2016.

Common stock, $0.0001 par value: 1,000,000 and 56,025 shares authorized as of March 31, 2017 and December 31, 2016, respectively; 57,014 and 32,674 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively

5

3

Additional paid-in capital

224,555

8,443

Accumulated deficit

(91,714)

(86,047)

Accumulated other comprehensive loss

(68)

(9)

Total stockholders' equity (deficit)

132,778

(77,610)

Total liabilities, redeemable convertible preferred stock, and stockholders' equity (deficit)

$ 223,674

$ 111,415

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)

In Thousands, except Share data, unless otherwise specified

Mar. 31, 2017

Dec. 31, 2016

Statement of Financial Position [Abstract]

Redeemable convertible preferred stock, par value (in dollars per share)

$ 0.0001

Redeemable convertible preferred stock, shares authorized (in shares)

0

14,899,000

Redeemable convertible preferred stock, shares issued (in shares)

0

14,647,000

Redeemable convertible preferred stock, shares outstanding (in shares)

0

14,647,000

Redeemable convertible preferred stock, aggregate liquidation preference

$ 0

$ 87,448

Preferred stock, par value

$ 0.0001

Preferred stock, shares authorized

10,000,000

0

Preferred stock, shares issued

0

Preferred stock, shares outstanding

0

Common stock par value per share

$ 0.0001

Common stock shares authorized

1,000,000,000

56,025,000

Common Stock shares issued

57,014,000

32,674,000

Common stock shares outstanding

57,014,000

32,674,000

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit (USD $)

In Thousands, except Share data

Total

Redeemable Convertible Preferred Stock [Member]

Common Stock [Member]

Additional Paid-in Capital [Member]

Accumulated Deficit [Member]

Accumulated Other Comprehensive Loss [Member]

Beginning Balance at Dec. 31, 2016

$ 99,182

Beginning Balance at Dec. 31, 2016

(77,610)

3

8,443

(86,047)

(9)

Beginning Balance, Shares at Dec. 31, 2016

14,647,000

Beginning Balance, Shares at Dec. 31, 2016

32,674,000

Issuance of common stock, value

114,106

1

114,105

Accretion of Series A redeemable convertible preferred stock issuance costs and redemption feature

1,983

Issuance of common stock, shares

9,000,000

Accretion of Series A redeemable convertible preferred stock issuance costs and redemption feature

(1,983)

Conversion of redeemable convertible preferred stock to common stock, value

101,165

(101,165)

1

101,164

Conversion of redeemable convertible preferred stock to common stock, shares

(14,647,000)

14,647,000

Exercise of stock options, value

884

Exercise of stock options, shares

693,000

Stock-based compensation, value

1,942

Cumulative translation adjustment

(48)

Unrealized loss on investments

(11)

Net loss

(5,667)

Ending Balance at Mar. 31, 2017

$ 132,778

$ 5

$ 224,555

$ (91,714)

$ (68)

Ending Balance, Shares at Mar. 31, 2017

57,014,000

Ending Balance, Shares at Mar. 31, 2017

0

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit (Parenthetical) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2017

Common Stock [Member]

Issuance of common stock, net

$ 3,074

Additional Paid-in Capital [Member]

Issuance of common stock, net

$ 3,074

Condensed Consolidated Statements of Cash Flows (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2017

Mar. 31, 2016

Cash flows from operating activities:

Net loss

$ (5,667)

$ (6,533)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

566

308

Stock-based compensation

1,942

637

Provision for doubtful accounts and sales reserve, net of recoveries

350

122

Loss (gain) on disposal of assets

30

(35)

Changes in operating assets and liabilities, net of effect of business acquisition:

Accounts receivable

11,175

8,295

Deferred commissions

860

443

Prepaid expenses and other assets

(1,220)

(378)

Accounts payable

(525)

691

Accrued payroll and payroll related liabilities

(3,506)

(2,704)

Accrued expenses and other current liabilities

977

449

Deferred revenue

(118)

1,718

Other liabilities

159

(8)

Net cash provided by operating activities

5,023

3,005

Cash flows from investing activities:

Purchases of property and equipment

(508)

(1,401)

Cash paid in business acquisition, net of cash acquired

(3,884)

Purchases of investments

(16,035)

(5,333)

Maturities of investments

8,524

Net cash used in investing activities

(11,903)

(6,734)

Cash flows from financing activities:

Proceeds from initial public offering, net of underwriting commissions and discounts

117,180

Payment of initial public offering costs

(797)

Principal payments on capital lease obligations

(82)

(27)

Proceeds from exercise of stock options

884

30

Net cash provided by financing activities

117,185

3

Effect of exchange rate changes on cash

(25)

Net increase (decrease) in cash and cash equivalents

110,280

(3,726)

Cash and cash equivalents-beginning of period

31,306

24,779

Cash and cash equivalents-end of period

141,586

21,053

Supplemental disclosure of noncash investing activities:

Property and equipment recorded in accounts payable

356

144

Consideration for business acquisition included in accrued expenses and other current liabilities and other liabilities

1,660

Supplemental disclosure of noncash financing activities:

Accretion of Series A redeemable convertible preferred stock

1,983

1,278

Deferred initial public offering costs recorded in accounts payable and accrued expenses

1,329

Property and equipment funded by capital lease borrowing

987

Series A Redeemable Convertible Preferred Stock [Member]

Supplemental disclosure of noncash financing activities:

Accretion of Series A redeemable convertible preferred stock

1,983

1,278

Conversion of Series A redeemable convertible preferred stock to common shares

$ 101,165

Business

1. Business

Our Company

Alteryx, Inc. and its subsidiaries, or we, our, or us, are a leading provider of self-service data analytics software. Our software platform enables organizations to dramatically improve business outcomes and the productivity of their business analysts. Our subscription-based platform allows organizations to easily prepare, blend, and analyze data from a multitude of sources and more quickly benefit from data-driven decisions. The ease-of-use, speed, and sophistication that our platform provides is enhanced through intuitive and highly repeatable visual workflows. We aim to make our platform as ubiquitous in the workplace as spreadsheets are today.

Initial Public Offering

In March 2017, we completed an initial public offering, or IPO, of our Class A common stock. In connection with the IPO, we sold 9.0 million shares of Class A common stock at $14.00 per share for aggregate net proceeds of $114.1 million after underwriting discounts and commissions and offering expenses. Prior to the closing of the IPO, all shares of common stock then outstanding were reclassified as Class B common stock and all shares of our then outstanding convertible preferred stock held prior to the IPO were converted into Class B common stock. See Note 5 for further discussion of our Class A and Class B common stock.

As of March 31, 2017, we had 9.0 million and 48.0 million shares of Class A common stock and Class B common stock issued and outstanding, respectively.

In April 2017, the underwriters exercised their option to purchase an additional 1.4 million shares of Class A common stock for net proceeds of approximately $17.6 million. See Note 11 for additional information on the underwriters’ exercise of their option to purchase additional shares.

Basis of Presentation

Our interim condensed consolidated financial statements are presented in accordance with accounting standards generally accepted in the United States of America, or U.S. GAAP, for interim financial information. Certain information and disclosures normally included in consolidated financial statements presented in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2016 included in our final prospectus related to our IPO dated March 23, 2017, or the Prospectus, filed with the Securities and Exchange Commission, or SEC, pursuant to Rule 424(b) under the Securities Act of 1933, as amended, or the Securities Act. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and reflect all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the condensed consolidated financial statements.

The operating results for the three months ended March 31, 2017 are not necessarily indicative of the results expected for the full year ending December 31, 2017.

Significant Accounting Policies

2. Significant Accounting Policies

There have been no changes to our accounting policies disclosed in our audited consolidated financial statements and the related notes for the year ended December 31, 2016 included in our Prospectus. As a result of the business combination in January 2017 (see Note 3), we have included our accounting policies relating to business combinations, intangible assets, and goodwill below.

Correction of an Error

In the course of preparing our consolidated financial statements as of and for the year ended December 31, 2016, we identified an error related to the improper calculation of royalty expense during the year ended December 31, 2016 associated with licensed third-party syndicated data. We have determined that the error was not material to our interim financial statements. The correction of this error resulted in a revision which increased cost of revenue, loss from operations, and net loss by $0.5 million for the three months ended March 31, 2016.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions.

On an ongoing basis, our management evaluates estimates and assumptions based on historical data and experience, as well as various other factors that our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

Business combinations

The results of businesses acquired in a business combination are included in our condensed consolidated financial statements from the date of the acquisition. We allocated the purchase price, including the fair value of contingent consideration, to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.

Contingent consideration payable in cash or a fixed dollar amount settleable in a variable number of shares is classified as a liability and recorded at fair value, with changes in fair value recorded in general and administrative expenses each period. Transaction costs associated with business combinations are expensed as incurred, and are included in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss.

We perform valuations of assets acquired, liabilities assumed, and contingent consideration and allocate the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired, liabilities assumed, and contingent consideration requires us to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, the probability of the achievement of specified milestones, and selection of comparable companies. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired, liabilities assumed, and contingent consideration in a business combination.

Intangible assets

Intangible assets consist of acquired developed technology. We determine the appropriate useful life of our intangible assets by performing an analysis of expected cash flows of the acquired assets. Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the economic benefits are consumed.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. We test goodwill for impairment in accordance with the provisions of Accounting Standards Codification, or ASC, 350, Intangibles – Goodwill and Other. Goodwill is tested for impairment at least annually at the reporting unit level or whenever events or changes in circumstances indicate that goodwill might be impaired. Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, unanticipated competition, loss of key personnel, significant changes in the use of the acquired assets or our strategy, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.

ASC 350 provides that an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if an entity concludes otherwise, then it is required to perform the first of a two-step impairment test.

The first step involves comparing the estimated fair value of a reporting unit with its book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. If, however, the fair value of the reporting unit is less than book value, then the carrying amount of the goodwill is compared with its implied fair value. The estimate of implied fair value of goodwill may require valuations of certain internally generated and unrecognized intangible assets. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.

We have one reporting unit and we test for goodwill impairment annually during the fourth quarter of each calendar year.

Variable Interest Entities

In accordance with ASC 810, Consolidation, the applicable accounting guidance for the consolidation of variable interest entities, or VIEs, we analyze our interests to determine if such interests are variable interests. If variable interests are identified, then the related entity is assessed to determine if it is a VIE. VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights and a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity). If we determine that the entity is a VIE, we then assess if we must consolidate the VIE. We deem ourselves to be the primary beneficiary if we have both (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (ii) an obligation to absorb losses of the entity that could potentially be significant to the VIE, or a right to receive benefits from the entity that could be significant to the VIE.

As of March 31, 2017 and December 31, 2016, we determined that two of our distributors were VIEs under the guidance of ASC 810, Consolidation, due to (i) our participation in the design of the distributor’s legal entity, (ii) our having a variable interest in the distributor, and (iii) our having the right to residual returns. We determined that we were not the primary beneficiary of these VIEs because we did not have (a) the power to direct the activities that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant. Therefore, we did not consolidate any assets or liabilities of these distributors in our consolidated balance sheets or record the results of these distributors in our consolidated statements of operations and comprehensive loss. Transactions with the distributors were accounted for in the same manner as our other distributors and resellers. As of March 31, 2017 and December 31, 2016, we had no exposure to losses from the contractual relationships with these VIEs or commitments to fund these VIEs.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Further, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This guidance is effective for annual or any interim goodwill impairment test in annual reporting periods beginning after December 15, 2021. Early adoption is permitted. While we continue to assess the potential impact of the adoption of this guidance, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which narrows the application of when an integrated set of assets and activities is considered a business and provides a framework to assist entities in evaluating whether both an input and a substantive process are present to be considered a business. It is expected that the new guidance will reduce the number of transactions that would need to be further evaluated and accounted for as a business. This guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted. We are evaluating the potential impact of adopting this guidance on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning and ending total amounts shown on the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019 and should be applied using a retrospective transition method to each period presented. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We have not yet determined the timing of adoption. We currently present changes in restricted cash within investing activities and so the adoption of this guidance will result in changes in net cash flows from investing activities and to certain beginning and ending cash and cash equivalent totals shown on our consolidated statement of cash flows.

In October 2016, FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. This guidance removes the prohibition in ASC 740, Income Taxes, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This guidance is intended to reduce the complexity of U.S. GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. This guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the potential impact of this guidance on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice, including presentation of cash flows relating to contingent consideration payments, proceeds from the settlement of insurance claims, and debt prepayment or debt extinguishment costs, among other matters. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If adopted in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Adoption of this guidance is required to be applied using a retrospective transition method to each period presented, unless impracticable to do so. We are currently evaluating the potential impact of this guidance on our consolidated statement of cash flows.

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions and related tax impacts, the classification of excess tax benefits on the statement of cash flows, statutory tax withholding requirements, and other stock-based compensation classification matters. This guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 31, 2018. Early adoption is permitted in any interim or annual period. All the amendments in the new guidance must be adopted in the same period. We are evaluating the potential impact of this guidance on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, creating Topic 842, which requires lessees to record the assets and liabilities arising from all leases in the statement of financial position. Under ASU 2016-02, lessees will recognize a liability for lease payments and a right-of-use asset. When measuring assets and liabilities, a lessee should include amounts related to option terms, such as the option of extending or terminating the lease or purchasing the underlying asset, that are reasonably certain to be exercised. For leases with a term of 12 months or less, lessees are permitted to make an accounting policy election to not recognize lease assets and liabilities. This guidance retains the distinction between finance leases and operating leases and the classification criteria remains similar. For financing leases, a lessee will recognize the interest on a lease liability separate from amortization of the right-of-use asset. In addition, repayments of principal will be presented within financing activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the statement of cash flows. This guidance will be effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, and is required to be applied using a modified retrospective approach. Early adoption is permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This guidance replaces most existing revenue recognition guidance. It provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year. During 2016, the FASB continued to issue additional amendments to this new revenue guidance. This new revenue guidance will be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early adoption is permitted for annual periods beginning after December 15, 2016. We are evaluating the potential impact of this guidance on our consolidated financial statements.

Business Combination

3. Business Combination

In January 2017, we acquired 100% of the outstanding equity of a software development firm based in Prague, Czech Republic that delivers a cloud-based data governance and metadata management platform. The total purchase consideration for the acquisition was approximately $5.6 million consisting of (i) $3.9 million in cash consideration paid on the acquisition date, (ii) $0.5 million in cash consideration held back for customary indemnification matters for a period of 24-months following the acquisition date, and (iii) $1.2 million of contingent consideration. See the penultimate paragraph of this note for further discussion on contingent consideration.

The condensed consolidated financial statements include the results of operations of the acquired company commencing as of the acquisition date. Revenues and operating results of the acquired company for the three months ended March 31, 2017 were not material to the condensed consolidated financial statements. During the three months ended March 31, 2017 we recognized $0.6 million of acquisition related costs in general and administrative expense in the condensed consolidated statement of operations and comprehensive loss.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of the acquisition (in thousands):


Assets acquired and liabilities assumed:
Cash and cash equivalents	$	60
Accounts receivable		162
Prepaid expenses and other current assets		27
Property and equipment		30
Intangible assets – developed technology		3,100
Goodwill		2,899
Accounts payable		(63	)
Accrued expenses and other current liabilities		(22	)
Deferred tax liability, included in other liabilities		(589	)

Total purchase consideration	$	5,604

Goodwill represents the excess of the purchase consideration over the fair value of the underlying intangible assets and net liabilities assumed. We believe the amount of goodwill resulting from the acquisition is primarily attributable to expected synergies from an assembled workforce, increased development capabilities, increased offerings to customers, and enhanced opportunities for growth and innovation. The goodwill resulting from the acquisition is not tax deductible.

We determined the fair value of the completed technology acquired in the acquisition using the multiple period excess earnings model. This model utilizes certain unobservable inputs classified as Level 3 measurements as defined by ASC 820, Fair Value Measurements and Disclosures. Key inputs utilized in the model include a discount rate of 45%, a market participant tax rate of 40%, and an estimated level of future cash flows based on current product and market data. Based on the valuation models, we determined the fair value of the completed technology to be $3.1 million with an amortization period of eight years.

A portion of the consideration is subject to earn-out provisions. Additional contingent earn-out consideration of up to $2.3 million in shares of our Class B common stock may be paid out to the former shareholders of the acquired company over two years upon the achievement of specified milestones. The number of shares that will be issued will be determined based on the total dollar value of consideration earned upon the achievement of a particular milestone divided by an average trading value of our Class A common stock calculated at the time of the issuance. We utilized a probability weighted scenario based model to determine the fair value of the contingent consideration. Based on this valuation model we determined the fair value of the contingent consideration to be $1.2 million as of the acquisition date. The contingent earn-out consideration has been recorded in Other liabilities in our accompanying condensed consolidated balance sheet with any changes in fair value each reporting period recorded in general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. Changes in fair value will depend on several factors including estimates of the timing and ability to achieve the milestones. There was no change in the fair value of the contingent consideration between the acquisition date and March 31, 2017.

Pro forma information as if the acquisition occurred on January 1, 2016 has not been presented as the impact is not material to our condensed consolidated financial statements.

Fair Value Measurements

4. Fair Value Measurements

We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:


Level 1		Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.


Level 2		Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active near the measurement date; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of our money market funds was determined based on “Level 1” inputs.

The fair value of certificates of deposit, U.S. Treasury and agency bonds, and corporate bonds were determined based on “Level 2” inputs. The valuation techniques used to measure the fair value of certificates of deposit included observable market-based inputs for similar assets, which primarily include yield curves and time-to-maturity factors. The valuation techniques used to measure the fair value of U.S. Treasury and agency bonds and corporate bonds included standard observable inputs, including reported trades, quoted market prices, matrix pricing, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets or benchmark securities and data provided by third parties as many of the bonds are not actively traded.

There were no marketable securities measured on a recurring basis in the “Level 3” category.

We have not elected the fair value option as prescribed by ASC 825, The Fair Value Option for Financial Assets and Financial Liabilities, for our financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, material financial assets and liabilities not carried at fair value, such as our accounts receivable and payables, are reported at their carrying values.

Instruments Measured at Fair Value on a Recurring Basis. The following tables present our cash and cash equivalents and investments’ costs, gross unrealized gains (losses), and fair value by major security type recorded as cash and cash equivalents or short-term or long-term investments as of March 31, 2017 and December 31, 2016 (in thousands):


	As of March 31, 2017
	Cost		Gross Unrealized Gains (Losses)			Fair Value		Cash and Cash Equivalents		Short-term Investments		Long-term Investments
Cash	$	127,202	$	—		$	127,202	$	127,202	$	—	$	—

Level 1:
Money market funds		12,384		—			12,384		12,384		—		—

Subtotal		12,384		—			12,384		12,384		—		—

Level 2:
Certificates of deposit		9,353		—			9,353		—		9,353		—
U.S. Treasury and agency bonds		7,998		(10	)		7,988		—		5,988		2,000
Corporate bonds		13,563		(10	)		13,553		2,000		7,561		3,992

Subtotal		30,914		(20	)		30,894		2,000		22,902		5,992

Level 3		—		—			—		—		—		—

Total	$	170,500	$	(20	)	$	170,480	$	141,586	$	22,902	$	5,992


	As of December 31, 2016
	Cost		Gross Unrealized Gains (Losses)		Fair Value		Cash and Cash Equivalents		Short-term Investments		Long-term Investments
Cash	$	10,499	$	—	$	10,499	$	10,499	$	—	$	—

Level 1:
Money market funds		20,807		—		20,807		20,807		—		—

Subtotal		20,807		—		20,807		20,807		—		—

Level 2:
Certificates of deposit		10,552		—		10,552		—		10,552		—
Corporate bonds		10,770		72		10,842		—		10,842		—

Subtotal		21,322		72		21,394		—		21,394		—

Level 3		—		—		—		—		—		—

Total	$	52,628	$	72	$	52,700	$	31,306	$	21,394	$	—

There were no transfers between Level 1, Level 2, or Level 3 securities during the three months ended March 31, 2017. As of March 31, 2017, there were 11 securities with a fair value of $21.5 million in an unrealized loss position for less than 12 months. The gross unrealized losses as of March 31, 2017 were due to changes in market rates, and we have determined the losses are temporary in nature.

All the long-term investments had maturities of between one and two years in duration as of March 31, 2017. Cash and cash equivalents, restricted cash, and investments as of March 31, 2017 and December 31, 2016 held domestically were approximately $169.6 million and $52.9 million, respectively.

Contingent Consideration. Contingent consideration in connection with acquisitions is measured at fair value each reporting period based on significant unobservable inputs, classified as Level 3 measurement. See Note 3 for additional information on the valuation of the contingent consideration as of the acquisition date and as of March 31, 2017.

Instruments Not Recorded at Fair Value on a Recurring Basis. The carrying amounts of our financial instruments, including cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate their current fair value because of their nature and relatively short maturity dates or durations.

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis. The fair value of our cost method investment is measured when it is deemed to be other-than-temporarily impaired, and assets acquired and liabilities assumed in a business acquisition, goodwill and other long lived assets when they are held for sale or determined to be impaired. See Note 3 for fair value measurements of certain assets and liabilities recorded at fair value on a non-recurring basis.

Stockholders' Equity

5. Stockholders’ Equity

Reverse Stock Split

In February 2017, we effected a 2-to-1 reverse stock split of our outstanding common and preferred stock and a corresponding reduction in the number of authorized shares of preferred stock. All share and per share amounts for all periods presented in these condensed consolidated financial statements and notes, have been adjusted retrospectively to reflect this reverse stock split.

Dual Class Common Stock Structure

In February 2017, we implemented a dual class common stock structure where each then existing share of common stock converted into a share of Class B common stock and we also authorized a new class of common stock, the Class A common stock. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to ten votes per share. The Class A common stock and Class B common stock have the same dividend and liquidation rights, and the Class B common stock converts to Class A common stock at any time at the option of the holder, or automatically upon the date that is the earliest of (i) the date specified by a vote of the holders of at least 66 2/3% of the outstanding shares of Class B common stock, (ii) March 29, 2027, or (iii) the date that the total number of shares of Class B common stock outstanding cease to represent at least 10% of the aggregate number of shares of Class A common stock and Class B common stock then outstanding. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, except for certain permitted transfers described in our restated certificate of incorporation, or the Restated Certificate. Upon the creation of the dual class common stock structure all outstanding options to purchase common stock became options to purchase an equivalent number of shares of Class B common stock, and all restricted stock units, or RSUs, became RSUs for an equivalent number of shares of Class B common stock.

Upon the effectiveness of the Restated Certificate in March 2017, the number of shares of capital stock that is authorized to be issued consisted of 500,000,000 shares of Class A common stock, $0.0001 par value per share, 500,000,000 shares of Class B common stock, $0.0001 par value per share, and 10,000,000 shares of undesignated preferred stock, $0.0001 par value per share.

Equity Awards

6. Equity Awards

Amended and Restated 2013 Stock Plan

We granted options and RSUs under our Amended and Restated 2013 Stock Plan, or 2013 Plan, as amended and restated, until March 22, 2017, when the plan was terminated in connection with our IPO. Accordingly, no shares are available for future issuance under this plan. The 2013 Plan continues to govern outstanding equity awards granted thereunder.

2017 Equity Incentive Plan

In February 2017, our board of directors adopted and our stockholders approved the 2017 Equity Incentive Plan, or 2017 Plan. The 2017 Plan became effective on March 22, 2017 and is the successor plan to the 2013 Plan. Under the 2017 Plan, we initially reserved (i) 5.1 million shares of Class A common stock for future issuance and (ii) 0.8 million shares of Class A common stock equal to the number of Class B shares reserved but not issued under the 2013 Plan as of the effective date of the 2017 Plan. The number of shares reserved for issuance under our 2017 Plan will increase automatically on the first day of January of each of 2018 through 2027 by the number of shares of Class A common stock equal to 5% of the total outstanding shares of our common stock as of the immediately preceding December 31. However, our board of directors may reduce the amount of the increase in any particular year. The share reserve may also increase to the extent that outstanding awards under our 2013 Plan expire or terminate. As of March 31, 2017, 5.6 million shares were reserved for issuance under the 2017 Plan.

2017 Employee Stock Purchase Plan

In February 2017, our board of directors adopted and our stockholders approved the 2017 Employee Stock Purchase Plan, or 2017 ESPP. The 2017 ESPP became effective on March 23, 2017. Under the 2017 ESPP, we reserved 1.1 million shares of Class A common stock for future issuance. The number of shares reserved for issuance under our 2017 ESPP will increase automatically on the first day of January of each of 2018 through 2027 by the number of shares equal to 1% of the total outstanding shares of our common stock as of the immediately preceding December 31. However, our board of directors may reduce the amount of the increase in any particular year.

Stock Options

Stock option activity during the three months ended March 31, 2017 consisted of the following (in thousands, except weighted-average information):


	Options Outstanding			Weighted- Average Exercise Price
Options outstanding at December 31, 2016		6,318		$	5.65
Granted		447			13.84
Exercised		(693	)		1.27
Cancelled/forfeited		(180	)		4.64

Options outstanding at March 31, 2017		5,892		$	6.81

As of March 31, 2017, there was $11.7 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 3.0 years.

Restricted Stock Units

RSU activity during the three months ended March 31, 2017 consisted of the following (in thousands, except weighted-average information):


	Awards Outstanding		Weighted- Average Grant Date Fair Value
RSUs outstanding at December 31, 2016		373	$	12.30
Granted		79		15.50

RSUs outstanding at March 31, 2017		452	$	12.86

RSUs outstanding as of December 31, 2016, or pre-2017 RSUs, vest upon the satisfaction of both a service condition and a liquidity condition. The service condition for these awards will be satisfied over four years. The liquidity condition is satisfied upon the occurrence of a qualifying event, defined as a change of control transaction, or 180 days following the closing of the IPO, which occurred in March 2017. Beginning on the closing of the IPO in March 2017, we recognized a cumulative share-based compensation expense for the portion of the pre-2017 RSUs that had met the service condition. In the three months ended March 31, 2017, share-based compensation expense related to our pre-2017 RSUs was $0.7 million.

As of March 31, 2017, total unrecognized compensation expense, adjusted for estimated forfeitures, related to unvested RSUs was approximately $4.5 million which is expected to be recognized over a weighted-average period of 1.9 years.

We classified stock-based compensation expense in the accompanying consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three Months Ended March 31,
	2017		2016
Cost of revenue	$	121	$	26
Research and development		236		73
Sales and marketing		659		310
General and administrative		926		228

Total	$	1,942	$	637

Commitments and Contingencies

7. Commitments and Contingencies

Leases

We have various non-cancelable operating leases for our offices. These leases expire at various times through 2024. Certain lease agreements contain renewal options, rent abatement, and escalation clauses.

Indemnification

In the ordinary course of business, we enter into agreements in which we may agree to indemnify other parties with respect to certain matters, including losses resulting from claims of intellectual property infringement, damages to property or persons, business losses, or other liabilities. In addition, we have entered into indemnification agreements with our directors, executive officers, and certain other employees that will require us to indemnify them against liabilities that may arise by reason of their status or service as directors, officers, or employees. The term of these indemnification agreements with our directors, executive officers, and other employees, are generally perpetual after execution of the agreement. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited; however, we maintain insurance that reduces our exposure and enables us to recover a portion of any future amounts paid. Through March 31, 2017, we have not had to reimburse any party for losses related to an indemnity claim. As of March 31, 2017 and December 31, 2016, we have not accrued a liability for these indemnification provisions because the likelihood of incurring a payment obligation, if any, in connection with these arrangements is not probable or reasonably estimable.

Litigation

From time to time, we may be involved in lawsuits, claims, investigations, and proceedings, consisting of intellectual property, commercial, employment, and other matters, which arise in the ordinary course of business.

We are not currently a party to any material legal proceedings or claims, nor are we aware of any pending or threatened litigation or claims that could have a material adverse effect on our business, operating results, cash flows, or financial condition should such litigation or claim be resolved unfavorably.

Income Taxes

8. Income Taxes

The following table presents details of the provision for income taxes and our effective tax rates (in thousands except percentages):


	Three Months Ended March 31,
	2017			2016
Provision for income taxes	$	150		$	37
Effective tax rate		2.7	%		0.6	%

We account for income taxes according to ASC 740, Income Taxes, which, among other things, requires that we estimate our annual effective income tax rate for the full year and apply it to pre-tax income (loss) to each interim period, taking into account year-to-date amounts and projected results for the full year. The provision for income taxes consists of federal, foreign, state, and local income taxes. Our effective tax rate differs from the statutory U.S. income tax rate due to the effect of state and local income taxes, generally lower tax rates in foreign jurisdictions compared to the United States, certain nondeductible expenses, and the changes in valuation allowances against our deferred tax assets. Our effective tax rate could change significantly from quarter to quarter because of recurring and nonrecurring factors.

We evaluate whether to record a valuation allowance against our deferred tax assets by considering all available positive and negative evidence, using a “more likely than not” realization standard, including our cumulative losses, and the amount and timing of future taxable income. Based on our review, we will continue to maintain a full valuation allowance against our U.S. deferred tax assets.

The income tax expense of $0.2 million for the three months ended March 31, 2017 includes U.S. and Czech tax expense from the sale of the intellectual property related to our products from the U.S. parent company to wholly owned subsidiaries outside the United States and from the Czech subsidiary to the U.S. parent company and other wholly owned subsidiaries outside the United States.

Neither we nor any of our subsidiaries are currently under examination from tax authorities in the jurisdictions in which we do business.

Basic and Diluted Net Loss Per Share

9. Basic and Diluted Net Loss Per Share

In periods in which we have net income, we apply the two-class method for calculating net loss per share. Under the two-class method, net income is attributed to common stockholders and participating securities based on their participation rights. Participating securities include convertible preferred stock. In periods in which we have net losses after accretion of convertible preferred stock, we do not attribute losses to participating securities as they are not contractually obligated to share our losses.

Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Net loss attributable to common stockholders is calculated as net loss including current period convertible preferred stock accretion.

Diluted net loss per share attributable to common stockholders adjusts basic net loss per share for the potentially dilutive impact of stock options and convertible preferred stock. As we have reported losses attributable to common stockholders for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share. Basic and diluted net loss per share attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights.

The following weighted-average equivalent shares of common stock were excluded from the diluted net loss per share calculation because their inclusion would have been anti-dilutive (in thousands):


	Three Months Ended March 31,
	2017		2016
Options to purchase common stock		6,170		5,023
Unvested restricted stock units		379		—
Conversion of convertible preferred stock		13,345		14,647

Total shares excluded from net loss per share		19,894		19,670

Segment and Geographic Information

10. Segment and Geographic Information

Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, or CODM, who is our chief executive officer, in deciding how to allocate resources and assess our financial and operational performance. Our CODM evaluates our financial information and resources and assesses the performance of these resources on a consolidated and aggregated basis. As a result, we have determined that our business operates in a single operating segment.

Our operations outside the United States include sales offices in Canada, Germany, Czech Republic, and the United Kingdom. Revenue by location is determined by the billing address of the customer. The following sets forth our revenue by geographic region (in thousands):


	Three Months Ended March 31,
	2017		2016
United States	$	22,596	$	15,245
International		5,949		3,149

Total	$	28,545	$	18,394

No countries outside the United States comprised more than 10% of revenue for any of the periods presented.

Subsequent Events

11. Subsequent Events

In April 2017, in connection with our IPO, the underwriters exercised their option to purchase 1.4 million additional shares of Class A common stock from us in full at a price of $14.00 per share. As a result of the exercise and closing of the option to purchase additional shares, total net proceeds from the IPO were approximately $131.7 million after underwriting discounts and commissions and offering expenses.

Significant Accounting Policies (Policies)

Correction of an Error

Correction of an Error

In the course of preparing our consolidated financial statements as of and for the year ended December 31, 2016, we identified an error related to the improper calculation of royalty expense during the year ended December 31, 2016 associated with licensed third-party syndicated data. We have determined that the error was not material to our interim financial statements. The correction of this error resulted in a revision which increased cost of revenue, loss from operations, and net loss by $0.5 million for the three months ended March 31, 2016.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions.

On an ongoing basis, our management evaluates estimates and assumptions based on historical data and experience, as well as various other factors that our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

Business combinations

Business combinations

The results of businesses acquired in a business combination are included in our condensed consolidated financial statements from the date of the acquisition. We allocated the purchase price, including the fair value of contingent consideration, to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.

Contingent consideration payable in cash or a fixed dollar amount settleable in a variable number of shares is classified as a liability and recorded at fair value, with changes in fair value recorded in general and administrative expenses each period. Transaction costs associated with business combinations are expensed as incurred, and are included in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss.

We perform valuations of assets acquired, liabilities assumed, and contingent consideration and allocate the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired, liabilities assumed, and contingent consideration requires us to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, the probability of the achievement of specified milestones, and selection of comparable companies. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired, liabilities assumed, and contingent consideration in a business combination.

Intangible assets

Intangible assets

Intangible assets consist of acquired developed technology. We determine the appropriate useful life of our intangible assets by performing an analysis of expected cash flows of the acquired assets. Intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the economic benefits are consumed.

Goodwill

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. We test goodwill for impairment in accordance with the provisions of Accounting Standards Codification, or ASC, 350, Intangibles – Goodwill and Other. Goodwill is tested for impairment at least annually at the reporting unit level or whenever events or changes in circumstances indicate that goodwill might be impaired. Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, unanticipated competition, loss of key personnel, significant changes in the use of the acquired assets or our strategy, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations.

ASC 350 provides that an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if an entity concludes otherwise, then it is required to perform the first of a two-step impairment test.

The first step involves comparing the estimated fair value of a reporting unit with its book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. If, however, the fair value of the reporting unit is less than book value, then the carrying amount of the goodwill is compared with its implied fair value. The estimate of implied fair value of goodwill may require valuations of certain internally generated and unrecognized intangible assets. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.

We have one reporting unit and we test for goodwill impairment annually during the fourth quarter of each calendar year.

Variable Interest Entities

Variable Interest Entities

In accordance with ASC 810, Consolidation, the applicable accounting guidance for the consolidation of variable interest entities, or VIEs, we analyze our interests to determine if such interests are variable interests. If variable interests are identified, then the related entity is assessed to determine if it is a VIE. VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights and a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity). If we determine that the entity is a VIE, we then assess if we must consolidate the VIE. We deem ourselves to be the primary beneficiary if we have both (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (ii) an obligation to absorb losses of the entity that could potentially be significant to the VIE, or a right to receive benefits from the entity that could be significant to the VIE.

As of March 31, 2017 and December 31, 2016, we determined that two of our distributors were VIEs under the guidance of ASC 810, Consolidation, due to (i) our participation in the design of the distributor’s legal entity, (ii) our having a variable interest in the distributor, and (iii) our having the right to residual returns. We determined that we were not the primary beneficiary of these VIEs because we did not have (a) the power to direct the activities that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant. Therefore, we did not consolidate any assets or liabilities of these distributors in our consolidated balance sheets or record the results of these distributors in our consolidated statements of operations and comprehensive loss. Transactions with the distributors were accounted for in the same manner as our other distributors and resellers. As of March 31, 2017 and December 31, 2016, we had no exposure to losses from the contractual relationships with these VIEs or commitments to fund these VIEs.

Recent Accounting Pronouncements