UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-34357
OPENTABLE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware |
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94-3374049 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
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799 Market Street, 4th Floor, San Francisco, CA |
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94103 |
(Address of Principal Executive Offices) |
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(Zip Code) |
(415) 344-4200
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter time period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer x |
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Smaller reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.
As of August 2, 2010, 22,860,247 shares of the registrants common stock were outstanding.
OPENTABLE, Inc.
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5 |
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7 |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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29 |
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
OPENTABLE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June 30, |
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December 31, |
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2010 |
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2009 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
29,419,000 |
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$ |
19,807,000 |
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Short-term investments |
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51,691,000 |
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50,221,000 |
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Accounts receivable, net of allowance for doubtful accounts of $636,000, and $590,000 at June 30, 2010 and December 31, 2009 |
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8,768,000 |
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7,617,000 |
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Prepaid expenses and other current assets |
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1,527,000 |
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1,301,000 |
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Deferred tax asset |
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6,024,000 |
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6,024,000 |
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Restricted cash |
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163,000 |
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172,000 |
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Total current assets |
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97,592,000 |
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85,142,000 |
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Property, equipment and software, net |
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13,139,000 |
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11,516,000 |
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Goodwill |
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1,805,000 |
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1,805,000 |
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Intangibles, net |
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845,000 |
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992,000 |
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Deferred tax asset |
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992,000 |
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498,000 |
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Other assets |
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432,000 |
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378,000 |
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TOTAL ASSETS |
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$ |
114,805,000 |
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$ |
100,331,000 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
1,084,000 |
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$ |
1,385,000 |
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Accrued expenses |
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4,136,000 |
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5,827,000 |
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Accrued compensation |
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3,374,000 |
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2,993,000 |
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Deferred revenue |
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1,842,000 |
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1,538,000 |
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Dining rewards payable |
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13,474,000 |
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11,611,000 |
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Total current liabilities |
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23,910,000 |
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23,354,000 |
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Deferred revenue non-current |
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3,157,000 |
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3,572,000 |
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Other long-term liabilities |
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749,000 |
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Total liabilities |
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27,816,000 |
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26,926,000 |
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COMMITMENTS AND CONTINGENCIES (Note 5) |
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STOCKHOLDERS EQUITY: |
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Common stock, $0.0001 par value 100,000,000 shares authorized; 23,041,336 and 22,652,716 shares issued, 22,831,089 and 22,442,469 shares outstanding at June 30, 2010 and December 31, 2009 |
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2,000 |
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2,000 |
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Additional paid-in capital |
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136,045,000 |
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127,454,000 |
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Treasury stock, at cost (210,247 shares at June 30, 2010 and December 31, 2009) |
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(647,000 |
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(647,000 |
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Accumulated other comprehensive loss |
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(243,000 |
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(128,000 |
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Accumulated deficit |
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(48,168,000 |
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(53,276,000 |
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Total stockholders equity |
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86,989,000 |
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73,405,000 |
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
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$ |
114,805,000 |
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$ |
100,331,000 |
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See notes to condensed consolidated financial statements.
OPENTABLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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REVENUES |
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$ |
22,453,000 |
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$ |
16,390,000 |
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$ |
43,704,000 |
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$ |
32,385,000 |
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COSTS AND EXPENSES: |
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Operations and support |
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6,324,000 |
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5,012,000 |
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12,326,000 |
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10,118,000 |
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Sales and marketing |
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5,046,000 |
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4,010,000 |
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9,786,000 |
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7,808,000 |
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Technology |
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3,020,000 |
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2,599,000 |
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5,740,000 |
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5,311,000 |
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General and administrative |
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3,879,000 |
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3,395,000 |
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7,902,000 |
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6,942,000 |
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Total costs and expenses |
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18,269,000 |
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15,016,000 |
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35,754,000 |
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30,179,000 |
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Income from operations |
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4,184,000 |
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1,374,000 |
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7,950,000 |
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2,206,000 |
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Other income, net |
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73,000 |
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91,000 |
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142,000 |
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146,000 |
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Income before taxes |
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4,257,000 |
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1,465,000 |
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8,092,000 |
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2,352,000 |
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Income tax expense |
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1,673,000 |
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773,000 |
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2,984,000 |
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1,294,000 |
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NET INCOME |
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$ |
2,584,000 |
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$ |
692,000 |
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$ |
5,108,000 |
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$ |
1,058,000 |
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Net income per share (See Note 7): |
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Basic |
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$ |
0.11 |
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$ |
0.04 |
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$ |
0.23 |
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$ |
0.08 |
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Diluted |
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$ |
0.11 |
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$ |
0.03 |
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$ |
0.21 |
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$ |
0.05 |
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Weighted average shares outstanding: |
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Basic |
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22,502,000 |
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15,327,000 |
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22,352,000 |
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12,802,000 |
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Diluted |
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23,801,000 |
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22,247,000 |
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23,648,000 |
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21,602,000 |
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See notes to condensed consolidated financial statements.
OPENTABLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended |
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June 30, |
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2010 |
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2009 |
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OPERATING ACTIVITIES: |
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Net income |
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$ |
5,108,000 |
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$ |
1,058,000 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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3,023,000 |
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2,537,000 |
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Amortization of intangibles |
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148,000 |
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Provision for doubtful accounts |
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497,000 |
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1,115,000 |
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Stock-based compensation |
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3,334,000 |
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1,684,000 |
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Write-off of property, equipment and software |
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266,000 |
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342,000 |
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Deferred taxes |
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(494,000 |
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864,000 |
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Excess tax benefit related to stock compensation |
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(2,734,000 |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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(1,662,000 |
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(1,198,000 |
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Prepaid expenses and other current assets |
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30,000 |
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(645,000 |
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Accounts payable |
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(134,000 |
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282,000 |
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Accrued expenses |
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2,573,000 |
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(17,000 |
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Accrued compensation |
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415,000 |
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268,000 |
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Deferred revenue |
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(111,000 |
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3,000 |
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Other long-term liabilities |
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749,000 |
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Dining rewards payable |
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1,863,000 |
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1,531,000 |
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Net cash provided by operating activities |
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12,871,000 |
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7,824,000 |
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INVESTING ACTIVITIES: |
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Purchases of property, equipment and software |
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(4,983,000 |
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(2,732,000 |
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Purchases of investments |
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(24,926,000 |
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(33,128,000 |
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Maturities of investments |
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23,175,000 |
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7,700,000 |
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Decrease in restricted cash |
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(1,000 |
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Net cash used in investing activities |
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(6,734,000 |
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(28,161,000 |
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FINANCING ACTIVITIES: |
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Excess tax benefit related to stock-based compensation |
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2,734,000 |
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Proceeds from issuance of common stock upon exercise of employee stock options |
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1,841,000 |
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36,000 |
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Proceeds from issuance of common stock in connection with initial public offering, net of offering costs |
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35,159,000 |
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Cash overdrafts |
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(988,000 |
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Proceeds from early exercise of common stock options |
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1,000 |
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Net cash provided by financing activities |
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3,587,000 |
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35,196,000 |
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EFFECT OF EXCHANGE RATES ON CASH |
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(112,000 |
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263,000 |
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NET INCREASE IN CASH AND CASH EQUIVALENTS |
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9,612,000 |
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15,122,000 |
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CASH AND CASH EQUIVALENTS Beginning of period |
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19,807,000 |
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5,528,000 |
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CASH AND CASH EQUIVALENTS End of period |
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$ |
29,419,000 |
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$ |
20,650,000 |
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(Continued) |
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OPENTABLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
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Six Months Ended |
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June 30, |
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2010 |
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2009 |
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SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW INFORMATION: |
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Cash paid for income taxes |
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$ |
390,000 |
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$ |
772,000 |
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SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: |
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Purchase of property, equipment and software recorded in accounts payable and accrued expenses |
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$ |
192,000 |
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$ |
277,000 |
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Vesting of early exercised stock options |
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$ |
595,000 |
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$ |
626,000 |
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Accrued offering costs |
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$ |
0 |
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$ |
336,000 |
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Conversion of convertible preferred stock to common stock |
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$ |
0 |
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$ |
21,909,000 |
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See notes to condensed consolidated financial statements. |
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(Concluded) |
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OPENTABLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Description of Business
OpenTable, Inc., a Delaware corporation (together with its wholly-owned subsidiaries, the Company), was formed on October 13, 1998. The Company provides solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. For restaurant customers, in addition to other products, the Company provides a proprietary Electronic Reservation Book (ERB), which combines proprietary software with computer hardware to deliver a solution that computerizes restaurant host-stand operations and replaces traditional pen-and-paper reservation books. The OpenTable ERB streamlines and enhances a number of business-critical functions and processes for restaurants, including reservation management, table management, guest recognition and email marketing. The Company also provides a web-based product for restaurants called OpenTable Connect (Connect). Like the ERB, Connect allows restaurants to take online reservations via the OpenTable website; however, Connect does not provide the operational benefits that the ERB delivers to reservation-intensive restaurants. For diners, the Company operates www.opentable.com, a popular restaurant reservation website. The OpenTable website enables diners to find, choose and book tables at restaurants on the OpenTable network, overcoming the inefficiencies associated with the traditional process of reserving by phone.
Certain Significant Risks and Uncertainties
The Company operates in a dynamic industry, and accordingly, can be affected by a variety of factors. For example, management of the Company believes that changes in any of the following areas could have a significant negative effect on the Company in terms of its future financial position, results of operations or cash flows: the ability to maintain an adequate rate of growth; the impact of the current economic climate on its business; the ability to effectively manage its growth; the ability to attract new restaurant customers; the ability to increase the number of visitors to its website and convert those visitors into diners; and the ability to retain existing restaurant customers and diners or encourage repeat reservations.
2. Summary of Significant Accounting Policies
Principles of Consolidation
These condensed consolidated financial statements include the accounts of OpenTable, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed on March 11, 2010 with the SEC (the 2009 Annual Report). The condensed
consolidated balance sheet as of December 31, 2009, included herein was derived from the audited consolidated financial statements as of that date but does not include all disclosures including notes required by GAAP.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of the Companys statement of financial position at June 30, 2010 and December 31, 2009, and the Companys results of operations for the three and six months ended June 30, 2010 and 2009, and its cash flows for the six months ended June 30, 2010 and 2009. The results for the three and six months ended June 30, 2010 are not necessarily indicative of the results to be expected for the year ending December 31, 2010. All references to June 30, 2010 or to the three or six months ended June 30, 2010 and 2009 in the notes to the condensed consolidated financial statements are unaudited.
The Company has made a reclassification on its condensed consolidated statement of cash flows for the six months ended June 30, 2009 to conform the presentation of accounts payable and accrued expenses to the current periods presentation. In addition, proceeds from issuance of common stock upon exercise of employee stock options have been included within a separate line item within financing activities.
Use of Estimates
The preparation of the Companys financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Recently Issued Accounting Standards
In October 2009, the Financial Accounting Standards Board (FASB) issued Topic 605Revenue Recognition (EITF 08-1, Multiple-Deliverable Revenue Arrangements, (amendments to Topic 605, Revenue Recognition)) and Topic 985Software (EITF 09-3, Certain Arrangements That Include Software Elements, (amendments to Topic 985, Software)). Topic 605Revenue Recognition requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. Topic 985Software removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. Topic 605Revenue Recognition and Topic 985Software should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently evaluating the impact of Topic 605Revenue Recognition and Topic 985Software on its consolidated financial statements.
Effective January 1, 2010, the Company adopted the FASBs updated guidance related to fair value measurements and disclosures which requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. In addition, in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3 inputs, a reporting entity should disclose separately information about purchases, sales, issuances and settlements (that is, on a gross basis rather than one net number). The updated guidance also requires that an entity should provide fair value measurement disclosures for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 fair value measurements. The guidance is effective for interim or annual financial reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll
forward activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. Adoption of the updated guidance did not have an impact on the Companys consolidated results of operations or financial condition.
3. Short-Term Investments and Fair Value Measurements
Short-term investments are summarized as follows:
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Amortized |
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Unrealized |
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Unrealized |
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Estimated Fair |
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At June 30, 2010: |
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U.S. government and agency securities |
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$ |
33,843,000 |
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$ |
8,000 |
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$ |
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$ |
33,851,000 |
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Certificates of deposit |
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17,842,000 |
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2,000 |
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(4,000 |
) |
17,840,000 |
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Total |
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$ |
51,685,000 |
|
$ |
10,000 |
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$ |
(4,000 |
) |
$ |
51,691,000 |
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Amortized |
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Unrealized |
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Unrealized |
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Estimated Fair |
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At December 31, 2009: |
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U.S. government and agency securities |
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$ |
20,722,000 |
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$ |
6,000 |
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$ |
(7,000 |
) |
$ |
20,721,000 |
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Certificates of deposit |
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27,131,000 |
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7,000 |
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(38,000 |
) |
27,100,000 |
|
||||
Commercial paper |
|
2,400,000 |
|
|
|
|
|
2,400,000 |
|
||||
Total |
|
$ |
50,253,000 |
|
$ |
13,000 |
|
$ |
(45,000 |
) |
$ |
50,221,000 |
|
As of December 31, 2009, certain investments with a total estimated fair value of $976,000 had maturity dates of greater than one year. As of June 30, 2010, there were no investments that had maturity dates of greater than one year.
Investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments that are generally classified within Level 1 of the fair value hierarchy include money market securities, U.S. government and agency securities and commercial paper. The types of investments that are generally classified within Level 2 of the fair value hierarchy include certificates of deposit. The Company classifies items in Level 2 if the investments are valued using observable inputs to quoted market prices, or other inputs that are observable or can be corroborated by observable market data. Investments are held by a custodian who obtains investment prices from a third party pricing provider that uses standard inputs to models which vary by asset class.
In accordance with Topic 820 Fair Value Measurements and Disclosures, the following table represents the Companys fair value hierarchy for its financial assets:
|
|
June 30, 2010 |
|
December 31, 2009 |
|
||||||||||||||
|
|
Aggregate |
|
|
|
|
|
Aggregate |
|
|
|
|
|
||||||
|
|
Fair Value |
|
Level 1 |
|
Level 2 |
|
Fair Value |
|
Level 1 |
|
Level 2 |
|
||||||
U.S. government and agency securities |
|
$ |
33,851,000 |
|
$ |
33,851,000 |
|
$ |
|
|
$ |
20,721,000 |
|
$ |
20,721,000 |
|
$ |
|
|
Certificates of deposit |
|
17,840,000 |
|
|
|
17,840,000 |
|
27,100,000 |
|
|
|
27,100,000 |
|
||||||
Commercial paper |
|
|
|
|
|
|
|
2,400,000 |
|
2,400,000 |
|
|
|
||||||
Total short-term investments |
|
$ |
51,691,000 |
|
$ |
33,851,000 |
|
$ |
17,840,000 |
|
$ |
50,221,000 |
|
$ |
23,121,000 |
|
$ |
27,100,000 |
|
The Company chose not to elect the fair value option as prescribed by Topic 825 Financial Instruments (Statement of Financial Accounting Standards (SFAS) No. 159) for its financial assets and liabilities that had not been previously carried at fair value. Therefore, financial assets and liabilities not carried at fair value, such as accounts payable, are still reported at their carrying values.
4. Acquired Intangible Assets
As of June 30, 2010, intangible assets included customer relationships of $558,000 (net of accumulated of amortization of $119,000), developed technology of $281,000 (net of accumulated of amortization of $93,000) and trademarks of $6,000 (net of accumulated of amortization of $9,000). As of December 31, 2009, intangible assets included customer relationships of $637,000 (net of accumulated of amortization of $40,000), developed technology of $344,000 (net of accumulated of amortization of $30,000) and trademarks of $11,000 (net of accumulated of amortization of $4,000). Intangible assets are amortized on a straight-line basis over the estimated useful lives which range from one to four years. Based on the current amount of intangibles subject to amortization, the estimated amortization expense for the succeeding four years is as follows: 2010 (remainder): $149,000; 2011: $284,000; 2012: $253,000; 2013: $159,000.
5. Commitments and Contingencies
The Company leases its facilities under operating leases. Leases expire at various dates through April 2013. The terms of the lease agreements provide for rental payments on a graduated basis. The Company recognizes rent expense on a straight-line basis over the lease period.
Litigation
On May 12, 2009, a patent infringement lawsuit was filed against the Company by Mount Hamilton Partners, LLC (Mount Hamilton) in the United States District Court for the Northern District of California, seeking, among other things, a judgment that the Company has infringed a certain patent held by Mount Hamilton, an injunctive order against the alleged infringing activities and an award for damages. If an injunction is granted, it could force the Company to stop or alter certain of its business activities, such as certain aspects of the OpenTable Dining Rewards Program. The Company has denied Mount Hamiltons allegations and asserted counterclaims seeking judicial declarations that the Mount Hamilton patent is not infringed, is unenforceable and is invalid. On October 6, 2009, the Company filed a petition for re-examination with the U.S. Patent and Trademark Office (PTO), asking the PTO to re-examine the patent in question and requesting that the claims of the Mount Hamilton patent be rejected. In addition, on October 21, 2009, the Company filed a motion in the district court asking the court to stay the current litigation pending the outcome of the requested re-examination proceeding. On December 7, 2009, the PTO granted the Companys petition for re-examination, and in its first non-final office action, rejected all of the claims of the patent at issue. In addition, the district court has stayed all proceedings pending re-examination of the patent, which is currently ongoing. The Company is not currently able to estimate the potential loss, if any, that may result from this claim.
The Company is also subject to various other legal proceedings and claims arising in the ordinary course of business. Although occasional adverse decisions or settlements may occur, management believes there is no litigation pending that could, individually or in the aggregate, have a material adverse effect on the Companys business, financial position, results of operations or cash flows.
6. Stockholders Equity
Common Stock
On May 21, 2009, the Company completed its initial public offering whereby the Company sold 2,022,684 shares of common stock for a price of $20.00 per share. As part of the offering 1,427,316 shares were also sold by existing shareholders at a price of $20.00 per share. Approximately $5.8 million in offering costs were incurred and have been deducted from additional paid-in capital.
Preferred Stock
Prior to the initial public offering, the Company had outstanding 6,898,187 shares of Series A convertible preferred stock and 2,177,550 shares of Series B convertible preferred stock. Each share of preferred stock was convertible into one share of common stock. The conversion of all shares of preferred stock into 9,075,737 shares of common stock occurred automatically upon the completion of the Companys initial public offering on May 21, 2009.
Stock-Based Compensation
The Company accounts for stock-based compensation under Topic 718 Stock Compensation (SFAS No. 123R), which requires compensation costs related to share-based transactions, including employee stock options, to be recognized in the financial statements based on fair value.
Under Topic 718 Stock Compensation, the fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.
The Company determined weighted average valuation assumptions as follows:
· VolatilityAs the Company does not have an extensive trading history for its common stock, the expected stock price volatility for the Companys common stock was estimated by taking the median historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of several public companies in the technology industry similar in size, stage of life cycle and financial leverage. The Company did not rely on implied volatilities of traded options in its industry peers common stock because the volume of activity was relatively low.
· Expected termThe expected term was estimated using the simplified method allowed under Topic 718 (Securities and Exchange Commission Staff Accounting Bulletin No. 110, Share-Based Payment).
· Risk-free rateThe risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.
· Forfeiture rateThe Company estimated the forfeiture rate based on its historical experience with forfeitures. The Company reviews the estimated forfeiture rates each period end and makes changes as factors affecting the forfeiture rate calculations and assumptions change.
· Dividend yieldThe Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero.
The following table summarizes the assumptions relating to the Companys stock options for the three and six months ended June 30, 2010:
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, 2010 |
|
June 30, 2010 |
|
Dividend yield |
|
0% |
|
0% |
|
Volatility |
|
52% |
|
52%-53% |
|
Risk-free interest rate |
|
2.15%-2.95% |
|
2.15%-2.95% |
|
Expected term, in years |
|
5.50-6.08 |
|
5.50-6.56 |
|
The Company granted 137,450 stock options during the three months ended June 30, 2010 and 897,430 stock options during the six months ended June 30, 2010. No stock options were granted in the three or six months ended June 30, 2009. The Company recorded stock-based compensation expense of $1,800,000 and $725,000 for three months ended June 30, 2010 and 2009, respectively, and $3,334,000 and $1,684,000 for the six months ended June 30, 2010 and 2009, respectively.
Topic 718 requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow. This requirement reduces net operating cash flows and increases net financing cash flows. For the three and six months ended June 30, 2010, the Company recorded $1,444,000 and $2,734,000, respectively, of excess tax benefits from stock-based compensation and none for the three and six months ended June 30, 2009.
7. Net Income Per Share
The Company calculates net income per share in accordance with Topic 260 Earnings per Share (SFAS No. 128, Earnings Per Share). Basic and diluted net income per share attributable to common stockholders are presented in conformity with the two-class method required for participating securities. The Companys weighted average unvested shares subject to repurchase and settle in shares of common stock upon vesting have the non-forfeitable right to receive dividends on an equal basis with common stock and therefore are considered participating securities that must be included in the calculation of net income per share using the two-class method.
Performance-Based Awards
Non-vested performance-based awards are included in the diluted shares outstanding each period if established performance criteria have been met at the end of the respective periods. 281,000 and 343,000 shares were excluded from the dilutive shares outstanding for the three months ended June 30, 2010 and 2009, respectively, as the performance criteria had not been met as of the respective dates. 281,000 and 343,000 shares were excluded from the dilutive shares outstanding for the six months ended June 30, 2010 and 2009, respectively, as the performance criteria had not been met as of the respective dates. Anti-dilutive shares in the amounts of 58,000 and 707,000 were excluded from the dilutive shares outstanding for the three months ended June 30, 2010 and 2009, respectively. Anti-dilutive shares in the amounts of 515,000 and 774,000 were excluded from the dilutive shares outstanding for the six months ended June 30, 2010 and 2009, respectively.
The following table sets forth the computation of basic and diluted net income per share for the periods indicated:
|
|
Three Months |
|
Six Months |
|
||||||||
|
|
Ended June 30, |
|
Ended June 30, |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Basic net income per common share calculation: |
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
2,584,000 |
|
$ |
692,000 |
|
$ |
5,108,000 |
|
$ |
1,058,000 |
|
Less: Undistributed earnings allocated to participating securities |
|
(30,000 |
) |
(25,000 |
) |
(68,000 |
) |
(50,000 |
) |
||||
Net income attributable to common shares - basic |
|
2,554,000 |
|
667,000 |
|
5,040,000 |
|
1,008,000 |
|
||||
Basic weighted average common shares outstanding |
|
22,502,000 |
|
15,327,000 |
|
22,352,000 |
|
12,802,000 |
|
||||
Basic net income per share |
|
$ |
0.11 |
|
$ |
0.04 |
|
$ |
0.23 |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net income per common share calculation: |
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
2,584,000 |
|
$ |
692,000 |
|
$ |
5,108,000 |
|
$ |
1,058,000 |
|
Less: Undistributed earnings allocated to participating securities |
|
(20,000 |
) |
(13,000 |
) |
(45,000 |
) |
(23,000 |
) |
||||
Net income attributable to common shares - diluted |
|
2,564,000 |
|
679,000 |
|
5,063,000 |
|
1,035,000 |
|
||||
Weighted average shares used to compute basic net income per share |
|
22,502,000 |
|
15,327,000 |
|
22,352,000 |
|
12,802,000 |
|
||||
Effect of potentially dilutive securities: |
|
|
|
|
|
|
|
|
|
||||
Unvested common shares subject to repurchase |
|
180,000 |
|
426,000 |
|
208,000 |
|
466,000 |
|
||||
Warrants to purchase convertible preferred stock |
|
|
|
84,000 |
|
|
|
83,000 |
|
||||
Employee stock options |
|
1,119,000 |
|
1,368,000 |
|
1,088,000 |
|
1,192,000 |
|
||||
Convertible preferred stock |
|
|
|
5,042,000 |
|
|
|
7,059,000 |
|
||||
Weighted average shares used to compute diluted net income per share |
|
23,801,000 |
|
22,247,000 |
|
23,648,000 |
|
21,602,000 |
|
||||
Diluted net income per share |
|
$ |
0.11 |
|
$ |
0.03 |
|
$ |
0.21 |
|
$ |
0.05 |
|
Correction of Earnings Per Share Subsequent to the issuance of the Companys interim financial statements as of June 30, 2009, management of the Company determined that the quarter ended June 30, 2009 basic and diluted net income per share was computed under the if-converted method rather than the required two-class method. Accordingly, a correction has been made herein to the previously reported basic net income per share amount for the quarter ended June 30, 2009. Basic net income per share for the quarter ended June 30, 2009 was previously reported as $0.05. Using the two-class method, basic net income per share for quarter ended June 30, 2009 is $0.04. The correction in the June 30, 2009 quarterly net income per share calculation did not impact the diluted net income per share amount or total net income previously reported for such period. The foregoing correction is not considered material by the Company.
8. Income Taxes
During the three and six months ended June 30, 2010, the Company recorded income tax expense of $1,673,000 and $2,984,000, respectively, which resulted in an effective tax rate of 39% and 37%, respectively. During the three and six months ended June 30, 2009, the Company recorded income tax expense of $773,000 and $1,294,000, respectively, which resulted in an effective tax rate of 53% and 55%, respectively. The tax provisions and the effective tax rates for the three and six months ended June 30, 2010 differed from those of the same periods ended June 30, 2009, primarily due to the increase in income before taxes and a reduction in compensation expense related to non-deductible share-based payments in the current year. The expected tax provision derived from applying the federal statutory rate to the Companys income before taxes for the three and six months ended June 30, 2010 differed from the Companys recorded income tax provision primarily due to compensation expense related to non-deductible share-based payments offset by the benefits of the recognition of current year state research and development credits. The Companys effective tax rate for the three and six months ended June 30, 2010 is not necessarily indicative of the effective tax rate that may be expected for fiscal year 2010.
Topic 740 Income Taxes (SFAS No. 109) prescribes that a tax position is required to meet a minimum recognition threshold before being recognized in the financial statements. The Companys gross unrecognized tax benefits as of June 30, 2010 and December 31, 2009 were $15,500,000 and $15,000,000, respectively. As of June 30, 2010 and December 31, 2009, the Company recorded $115,000 and $32,000, respectively, of accrued interest. No significant penalties have been recorded to date.
9. Comprehensive Income (Loss)
In accordance with Topic 220 Comprehensive Income (SFAS No. 130, Reporting Comprehensive Income), the Company reports by major components and as a single total, the change in its net assets during the period from non-owner sources. Comprehensive income (loss) consists of net income and accumulated other comprehensive income (loss), which includes certain changes in equity that are excluded from net income. Specifically, it includes cumulative foreign currency translation and the unrealized gain (loss) from investments. Comprehensive income for the three months ended June 30, 2010 and 2009 was $2,498,000 and $897,000, respectively.
Accumulated other comprehensive loss of $243,000 as of June 30, 2010 was comprised of $6,000 of unrealized gain on investments and $249,000 of foreign currency translation losses. Accumulated other comprehensive loss of $128,000 as of December 31, 2009 was comprised of $32,000 of unrealized loss on investments and $96,000 of foreign currency translation losses.
10. Segment Information
The Company operates in one industryonline reservations and guest management solutions. The Company has two reportable segments: North America and International, as defined by Topic 280 Segment Reporting (SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information). Reportable segments have been identified based on how management makes operating decisions, assesses performance and allocates resources. The Chief Executive Officer acts as the chief operating decision maker on behalf of both segments. The Company does not allocate assets discretely by reportable segments, and reviews asset information on a global basis, not by segment.
Summarized financial information concerning the reportable segments is as follows:
|
|
North America |
|
International |
|
Total |
|
|||
Three months ended June 30, 2010 |
|
|
|
|
|
|
|
|||
Revenuessubscription |
|
$ |
9,450,000 |
|
$ |
1,012,000 |
|
$ |
10,462,000 |
|
Revenuesreservations |
|
10,468,000 |
|
263,000 |
|
10,731,000 |
|
|||
Revenuesinstallation and other |
|
1,238,000 |
|
22,000 |
|
1,260,000 |
|
|||
Income (loss) from operations |
|
5,653,000 |
|
(1,469,000 |
) |
4,184,000 |
|
|||
Interest income |
|
72,000 |
|
|
|
72,000 |
|
|||
Depreciation and amortization expense |
|
1,495,000 |
|
135,000 |
|
1,630,000 |
|
|||
Purchases of property, equipment and software |
|
2,742,000 |
|
260,000 |
|
3,002,000 |
|
|||
Three months ended June 30, 2009 |
|
|
|
|
|
|
|
|||
Revenuessubscription |
|
$ |
7,992,000 |
|
$ |
708,000 |
|
$ |
8,700,000 |
|
Revenuesreservations |
|
6,800,000 |
|
128,000 |
|
6,928,000 |
|
|||
Revenuesinstallation and other |
|
743,000 |
|
19,000 |
|
762,000 |
|
|||
Income (loss) from operations |
|
2,958,000 |
|
(1,584,000 |
) |
1,374,000 |
|
|||
Interest income |
|
81,000 |
|
|
|
81,000 |
|
|||
Depreciation and amortization expense |
|
1,163,000 |
|
111,000 |
|
1,274,000 |
|
|||
Purchases of property, equipment and software |
|
1,275,000 |
|
89,000 |
|
1,364,000 |
|
|||
Six months ended June 30, 2010 |
|
|
|
|
|
|
|
|||
Revenuessubscription |
|
$ |
18,541,000 |
|
$ |
1,972,000 |
|
$ |
20,513,000 |
|
Revenuesreservations |
|
20,266,000 |
|
502,000 |
|
20,768,000 |
|
|||
Revenuesinstallation and other |
|
2,373,000 |
|
50,000 |
|
2,423,000 |
|
|||
Income (loss) from operations |
|
10,946,000 |
|
(2,996,000 |
) |
7,950,000 |
|
|||
Interest income |
|
137,000 |
|
|
|
137,000 |
|
|||
Depreciation and amortization expense |
|
2,898,000 |
|
273,000 |
|
3,171,000 |
|
|||
Purchases of property, equipment and software |
|
4,560,000 |
|
423,000 |
|
4,983,000 |
|
|||
Six months ended June 30, 2009 |
|
|
|
|
|
|
|
|||
Revenuessubscription |
|
$ |
15,726,000 |
|
$ |
1,363,000 |
|
$ |
17,089,000 |
|
Revenuesreservations |
|
13,590,000 |
|
242,000 |
|
13,832,000 |
|
|||
Revenuesinstallation and other |
|
1,408,000 |
|
56,000 |
|
1,464,000 |
|
|||
Income (loss) from operations |
|
5,284,000 |
|
(3,078,000 |
) |
2,206,000 |
|
|||
Interest income |
|
167,000 |
|
|
|
167,000 |
|
|||
Depreciation and amortization expense |
|
2,322,000 |
|
215,000 |
|
2,537,000 |
|
|||
Purchases of property, equipment and software |
|
2,593,000 |
|
139,000 |
|
2,732,000 |
|
(1) A significant majority of the Companys Technology costs are incurred in the United States and as such are allocated to the North America segment. There are no internal revenue transactions between the Companys reporting segments.
Geographical Information
The Company is domiciled in the United States and has international operations in Canada, Germany, Japan, Mexico and the United Kingdom. Information regarding the Companys operations by geographic area is presented below:
|
|
Three Months |
|
Six Months |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
||||
United States |
|
$ |
19,857,000 |
|
$ |
14,774,000 |
|
$ |
38,720,000 |
|
$ |
29,176,000 |
|
Internationalall others |
|
2,596,000 |
|
1,616,000 |
|
4,984,000 |
|
3,209,000 |
|
||||
Total revenues |
|
$ |
22,453,000 |
|
$ |
16,390,000 |
|
$ |
43,704,000 |
|
$ |
32,385,000 |
|
|
|
As of |
|
As of |
|
||
|
|
June 30, |
|
December 31, |
|
||
|
|
2010 |
|
2009 |
|
||
Long-lived assets(1): |
|
|
|
|
|
||
United States |
|
$ |
11,442,000 |
|
$ |
9,872,000 |
|
Internationalall others |
|
2,129,000 |
|
2,022,000 |
|
||
Total long-lived assets |
|
$ |
13,571,000 |
|
$ |
11,894,000 |
|
(1) Includes all non-current assets except deferred tax assets, goodwill and intangible assets.
The Company has no customers that individually, or in the aggregate, exceed 10% of revenues or accounts receivable as of and for any of the period presented above.
11. Subsequent Events
On August 2, 2010, the Company entered into an asset purchase agreement, pursuant to which the Company agreed to acquire substantially all of the assets and certain liabilities of Table Maestro, a provider of restaurant telephone reservation services and other dining-related services, for a purchase price of $1.5 million and additional performance-based payments. The consummation of the acquisition is subject to customary closing conditions.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our 2009 Annual Report.
This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are often identified by the use of words such as, but not limited to, anticipate, believe, can, continue, could, estimate, expect, intend, may, will, plan, project, seek, should, target, will, would and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled Risk Factors included below and in our 2009 Annual Report. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
We provide solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. Our solutions include our proprietary ERB and Connect for restaurant customers and www.opentable.com, a popular restaurant reservation website for diners. The OpenTable network includes approximately 14,000 OpenTable restaurant customers spanning all 50 states as well as select markets outside of the United States. Since our inception in 1998, we have seated approximately 160 million diners through OpenTable reservations. Restaurants that use our ERB pay us a one-time installation fee for onsite installation and training, a monthly subscription fee for the use of our software and hardware and a fee for each restaurant guest seated through online reservations. Restaurants that use Connect pay us a monthly subscription fee for the use of our software and a fee for each restaurant guest seated through online reservations. Our online restaurant reservation service is free to diners. For the three months ended June 30, 2010 and 2009, our net revenues were $22.5 million and $16.4 million, respectively. For the six months ended June 30, 2010 and 2009, our net revenues were $43.7 million and $32.4 million, respectively. For the three months ended June 30, 2010 and 2009, our subscription revenues accounted for 47% and 53% of our total revenues, respectively, and 47% and 53% of total revenue for the six months ended June 30, 2010 and 2009, respectively. For the three months ended June 30, 2010 and 2009, our reservation revenues accounted for 48% and 42% of our total revenues, respectively, and 48% and 43% of total revenue for the six months ended June 30, 2010 and 2009, respectively.
In 2004, we began to selectively expand outside of North America into countries that are characterized by large numbers of online consumer transactions and reservation-taking restaurants. To date, we have concentrated our international efforts in Germany, Japan and the United Kingdom. Our revenues outside of North America for the three months ended June 30, 2010 and 2009 represented 6% and 5% of our total revenues, respectively, and 6% and 5% of total revenue for the six months ended June 30, 2010 and 2009, respectively. We intend to continue to incur substantial expenses in advance of recognizing material related revenues as we attempt to further penetrate our existing international markets and selectively enter new markets. Some international markets may fail to meet our expectations, and we may decide to realign our focus, as we did when we closed our offices in Spain and France in the fourth quarter of 2008.
Basis of Presentation
General
We report consolidated operations in U.S. dollars and operate in two geographic segments: North America and International. The North America segment is comprised of all of our operations in the United States, Canada and Mexico, and the International segment is comprised of all non-North America operations, which includes operations in Europe and Asia.
Revenues
We generate substantially all of our revenues from our restaurant customers; we do not charge any fees to diners. Our revenues include installation fees for our ERB (including training), monthly subscription fees for our ERB and Connect and a fee for each restaurant guest seated through online reservations. Installation fees are recognized on a straight-line basis over an estimated customer life of approximately six years. Subscription revenues are recognized on a straight-line basis during the contractual period over which the service is delivered to our restaurant customers. Revenues from online reservations are recognized on a transaction basis as the diners are seated by the restaurant. Revenues are shown net of redeemable Dining Points issued to diners. See Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies and EstimatesDining Rewards Loyalty Program in our 2009 Annual Report.
Costs and Expenses
Operations and support. Our operations and support expenses consist primarily of payroll and related costs, including bonuses and stock-based compensation, for those employees associated with installation, support and maintenance for our restaurant customers, as well as costs related to our outsourced call center. Operations and support expenses also include restaurant equipment costs, such as depreciation on restaurant-related hardware, shipping costs related to restaurant equipment, restaurant equipment costs that do not meet the capitalization threshold, referral payments and website connectivity costs. Operations and support expenses also include amortization of capitalized website and internal use software development costs (see Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies and EstimatesWebsite and Software Development Costs in our 2009 Annual Report). Also included in operations and support expenses are travel and related expenses incurred by the employees providing installation and support services for our restaurant customers, plus allocated facilities costs.
Sales and marketing. Our sales and marketing expenses consist primarily of salaries, benefits and incentive compensation for sales and marketing employees, including stock-based compensation. Also included are expenses for trade shows, public relations and other promotional and marketing activities, travel and entertainment expenses and allocated facilities costs.
Technology. Our technology expenses consist primarily of salaries and benefits, including bonuses and stock-based compensation, for employees and contractors engaged in the development and ongoing maintenance of our website, infrastructure and software, as well as allocated facilities costs.
General and administrative. Our general and administrative costs consist primarily of salaries and benefits, including stock-based compensation, for general and administrative employees and contractors involved in executive, finance, accounting, risk management, human resources and legal roles. In addition, general and administrative costs include consulting, legal, accounting and other professional fees. Bad debt, third party payment processor, credit card, bank processing fees and allocated facilities costs are also included in general and administrative expenses.
Headcount consists of full-time equivalent employees, as well as full-time equivalent contractors, in all of the sections noted below.
Other Income, Net
Other income, net consists primarily of the interest income earned on our cash accounts. Foreign exchange gains and losses are also included in other income, net.
Income Taxes
We are subject to income tax in the United States as well as other foreign tax jurisdictions in which we conduct business. Earnings from our foreign operations are subject to local jurisdictional income tax and may also be subject to current U.S. income tax.
During the three and six months ended June 30, 2010, we recorded income tax expense of $1.7 million and $3.0 million, respectively, which resulted in an effective tax rate of 39% and 37%, respectively. During the three and six months ended June 30, 2009, we recorded income tax expense of $0.8 million and $1.3 million, respectively, which resulted in an effective tax rate of 53% and 55%, respectively. The tax provisions and the effective tax rates for the three and six months ended June 30, 2010 differed from those of the same periods ended June 30, 2009, primarily due to the increase in income before taxes and a reduction in compensation expense related to non-deductible share-based payments in the current year. The expected tax provision derived from applying the federal statutory rate to our income before taxes for the
three and six months ended June 30, 2010 differed from our recorded income tax provision primarily due to compensation expense related to non-deductible share-based payments offset by the benefits of the recognition of current year state research and development credits. Our effective tax rate for the three and six months ended June 30, 2010 is not necessarily indicative of the effective tax rate that may be expected for fiscal year 2010.
Factors that impact our income tax provision include, but are not limited to, the compensation expense related to non-deductible share-based payments, recognition of research and development tax benefits and discrete tax benefits arising from the disqualified disposition of certain stock-based compensation awards.
Critical Accounting Policies and Estimates
In presenting our financial statements in conformity with accounting principles generally accepted in the United States, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures.
Some of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events. We base these estimates and assumptions on historical experience or on various other factors that we believe to be reasonable and appropriate under the circumstances. On an ongoing basis, we reconsider and evaluate our estimates and assumptions. Our future estimates may change if the underlying assumptions change. Actual results may differ significantly from these estimates.
There have been no material changes to our critical accounting policies. For further information on our critical and other significant accounting policies, see our 2009 Annual Report.
We believe that the following critical accounting policies involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our consolidated financial statements:
· Revenue Recognition;
· Dining Rewards Loyalty Program;
· Website and Software Development Costs;
· Income Taxes; and
· Stock-Based Compensation.
Results of Operations
The following tables set forth our results of operations for the periods presented and as a percentage of our revenues for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
2010 |
|
2009 (2) |
|
2010 |
|
2009 |
|
||||
|
|
(In thousands, except per share amounts) |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||
REVENUES |
|
$ |
22,453 |
|
$ |
16,390 |
|
$ |
43,704 |
|
$ |
32,385 |
|
|
|
|
|
|
|
|
|
|
|
||||
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
||||
Operations and support (1) |
|
6,324 |
|
5,012 |
|
12,326 |
|
10,118 |
|
||||
Sales and marketing (1) |
|
5,046 |
|
4,010 |
|
9,786 |
|
7,808 |
|
||||
Technology (1) |
|
3,020 |
|
2,599 |
|
5,740 |
|
5,311 |
|
||||
General and administrative (1) |
|
3,879 |
|
3,395 |
|
7,902 |
|
6,942 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total costs and expenses |
|
18,269 |
|
15,016 |
|
35,754 |
|
30,179 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income from operations |
|
4,184 |
|
1,374 |
|
7,950 |
|
2,206 |
|
||||
Other income, net |
|
73 |
|
91 |
|
142 |
|
146 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Income before taxes |
|
4,257 |
|
1,465 |
|
8,092 |
|
2,352 |
|
||||
Income tax expense |
|
1,673 |
|
773 |
|
2,984 |
|
1,294 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
NET INCOME |
|
$ |
2,584 |
|
$ |
692 |
|
$ |
5,108 |
|
$ |
1,058 |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share: |
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.11 |
|
$ |
0.04 |
|
$ |
0.23 |
|
$ |
0.08 |
|
Diluted |
|
$ |
0.11 |
|
$ |
0.03 |
|
$ |
0.21 |
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
||||
Basic |
|
22,502 |
|
15,327 |
|
22,352 |
|
12,802 |
|
||||
Diluted |
|
23,801 |
|
22,247 |
|
23,648 |
|
21,602 |
|
(1) Stock-based compensation included in above line items:
Operations and support |
|
$ |
232 |
|
$ |
68 |
|
$ |
419 |
|
$ |
154 |
|
Sales and marketing |
|
471 |
|
185 |
|
865 |
|
408 |
|
||||
Technology |
|
360 |
|
117 |
|
643 |
|
291 |
|
||||
General and administrative |
|
737 |
|
355 |
|
1,407 |
|
831 |
|
||||
|
|
$ |
1,800 |
|
$ |
725 |
|
$ |
3,334 |
|
$ |
1,684 |
|
(2) Certain corrections have been made to previously reported Earnings Per Share amounts for the three months ended June 30, 2009. See Note 7 of the accompanying notes to our condensed consolidated financial statements.
Other Operational Data: |
|
|
|
|
|
|
|
|
|
||||
Installed restaurants (at period end): |
|
|
|
|
|
|
|
|
|
||||
North America |
|
12,250 |
|
9,971 |
|
12,250 |
|
9,971 |
|
||||
International |
|
1,878 |
|
1,193 |
|
1,878 |
|
1,193 |
|
||||
Total |
|
14,128 |
|
11,164 |
|
14,128 |
|
11,164 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Seated diners (in thousands): |
|
|
|
|
|
|
|
|
|
||||
North America |
|
15,130 |
|
10,071 |
|
29,223 |
|
19,993 |
|
||||
International |
|
463 |
|
206 |
|
871 |
|
392 |
|
||||
Total |
|
15,593 |
|
10,277 |
|
30,094 |
|
20,385 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Headcount (at period end): |
|
|
|
|
|
|
|
|
|
||||
North America |
|
293 |
|
252 |
|
293 |
|
252 |
|
||||
International |
|
73 |
|
61 |
|
73 |
|
61 |
|
||||
Total |
|
366 |
|
313 |
|
366 |
|
313 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Additional Financial Data: |
|
|
|
|
|
|
|
|
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
21,156 |
|
$ |
15,535 |
|
$ |
41,180 |
|
$ |
30,724 |
|
International |
|
1,297 |
|
855 |
|
2,524 |
|
1,661 |
|
||||
Total |
|
$ |
22,453 |
|
$ |
16,390 |
|
$ |
43,704 |
|
$ |
32,385 |
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
5,653 |
|
$ |
2,958 |
|
$ |
10,946 |
|
$ |
5,284 |
|
International |
|
(1,469 |
) |
(1,584 |
) |
(2,996 |
) |
(3,078 |
) |
||||
Total |
|
$ |
4,184 |
|
$ |
1,374 |
|
$ |
7,950 |
|
$ |
2,206 |
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
1,495 |
|
$ |
1,163 |
|
$ |
2,898 |
|
$ |
2,322 |
|
International |
|
135 |
|
111 |
|
273 |
|
215 |
|
||||
Total |
|
$ |
1,630 |
|
$ |
1,274 |
|
$ |
3,171 |
|
$ |
2,537 |
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation: |
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
1,689 |
|
$ |
656 |
|
$ |
3,168 |
|
$ |
1,490 |
|
International |
|
111 |
|
69 |
|
166 |
|
194 |
|
||||
Total |
|
$ |
1,800 |
|
$ |
725 |
|
$ |
3,334 |
|
$ |
1,684 |
|
|
|
Three Months Ended |
|
Six Months Ended |
|
||||
|
|
June 30, |
|
June 30, |
|
||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
(as a percentage of revenue) |
|
||||||
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
100 |
% |
100 |
% |
100 |
% |
100 |
% |
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
Operations and support |
|
28 |
|
31 |
|
28 |
|
31 |
|
Sales and marketing |
|
23 |
|
24 |
|
22 |
|
24 |
|
Technology |
|
13 |
|
16 |
|
13 |
|
16 |
|
General and administrative |
|
17 |
|
21 |
|
18 |
|
21 |
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
81 |
|
92 |
|
81 |
|
92 |
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
19 |
|
8 |
|
19 |
|
7 |
|
Other income, net |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
|
19 |
|
9 |
|
19 |
|
7 |
|
Income tax expense |
|
7 |
|
5 |
|
7 |
|
4 |
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
12 |
% |
4 |
% |
12 |
% |
3 |
% |
Revenues
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
||||||||
|
|
June 30, |
|
June 30, |
|
Three Month |
|
Six Month |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
% Change |
|
% Change |
|
||||
|
|
(Dollars in thousands) |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues by Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription |
|
$ |
10,462 |
|
$ |
8,700 |
|
$ |
20,513 |
|
$ |
17,089 |
|
20 |
% |
20 |
% |
Reservation |
|
10,731 |
|
6,928 |
|
20,768 |
|
13,832 |
|
55 |
% |
50 |
% |
||||
Installation and other |
|
1,260 |
|
762 |
|
2,423 |
|
1,464 |
|
65 |
% |
66 |
% |
||||
Total |
|
$ |
22,453 |
|
$ |
16,390 |
|
$ |
43,704 |
|
$ |
32,385 |
|
37 |
% |
35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Percentage of Revenues by Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscription |
|
47 |
% |
53 |
% |
47 |
% |
53 |
% |
|
|
|
|
||||
Reservation |
|
48 |
% |
42 |
% |
48 |
% |
43 |
% |
|
|
|
|
||||
Installation and other |
|
6 |
% |
5 |
% |
6 |
% |
5 |
% |
|
|
|
|
||||
Total |
|
100 |
% |
100 |
% |
100 |
% |
100 |
% |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues by Location: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
$ |
21,156 |
|
$ |
15,535 |
|
$ |
41,180 |
|
$ |
30,724 |
|
36 |
% |
34 |
% |
International |
|
1,297 |
|
855 |
|
2,524 |
|
1,661 |
|
52 |
% |
52 |
% |
||||
Total |
|
$ |
22,453 |
|
$ |
16,390 |
|
$ |
43,704 |
|
$ |
32,385 |
|
37 |
% |
35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Percentage of Revenues by Location: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
94 |
% |
95 |
% |
94 |
% |
95 |
% |
|
|
|
|
||||
International |
|
6 |
% |
5 |
% |
6 |
% |
5 |
% |
|
|
|
|
||||
Total |
|
100 |
% |
100 |
% |
100 |
% |
100 |
% |
|
|
|
|
Total revenues increased $6.1 million, or 37%, for the three months ended June 30, 2010 compared to the three months ended June 30, 2009 and $11.3 million, or 35%, for the six months ended June 30, 2010 compared to the six months ended June 30, 2009. Subscription revenues increased $1.8 million, or 20%, for the three months ended June 30, 2010 compared to the three months ended June 30, 2009 and $3.4 million, or 20%, for the six months ended June 30, 2010 compared to the six months ended June 30, 2009. Subscription revenues increased as a result of the increase in installed restaurants. Reservation revenues increased $3.8 million, or 55%, for the three months ended June 30, 2010 compared to the three months ended June 30, 2009 and $6.9 million, or 50%, for the six months ended June 30, 2010 compared to the six months ended June 30, 2009. Reservation revenues increased as a result of the increase in seated diners.
Costs and Expenses
Operations and Support
|
|
Three Months Ended |
|
Six Months Ended |
|
Three |
|
Six |
|
||||||||
|
|
June 30, |
|
June 30, |
|
Month |
|
Month |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
% Change |
|
% Change |
|
||||
|
|
(Dollars in thousands) |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operations and support |
|
$ |
6,324 |
|
$ |
5,012 |
|
$ |
12,326 |
|
$ |
10,118 |
|
26 |
% |
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Headcount (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
84 |
|
76 |
|
84 |
|
76 |
|
11 |
% |
11 |
% |
||||
International |
|
33 |
|
26 |
|
33 |
|
26 |
|
27 |
% |
27 |
% |
||||
Total |
|
117 |
|
102 |
|
117 |
|
102 |
|
15 |
% |
15 |
% |
||||
Our operations and support expenses increased $1.3 million, or 26%, for the three months ended June 30, 2010 compared to the three months ended June 30, 2009 and $2.2 million, or 22%, for the six months ended June 30, 2010 compared to the six months ended June 30, 2009. The increase in operations and support expenses was primarily attributable to an increase of $0.8 million for the three months and $1.1 million for the six months in headcount related costs, related to the increase in operations and support headcount, as well as a $0.2 million increase for the three months and $0.5 million for the six months in depreciation and amortization, primarily related to capitalized website and software development costs and an increase of $0.2 million for the three months and $0.3 million for the six months in restaurant equipment shipping and depreciation expense, as a result of the increased installed base of restaurants.
Sales and Marketing
|
|
Three Months Ended |
|
Six Months Ended |
|
Three |
|
Six |
|
||||||||
|
|
June 30, |
|
June 30, |
|
Month |
|
Month |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
% Change |
|
% Change |
|
||||
|
|
(Dollars in thousands) |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
$ |
5,046 |
|
$ |
4,010 |
|
$ |
9,786 |
|
$ |
7,808 |
|
26 |
% |
25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Headcount (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
North America |
|
87 |
|
59 |
|
87 |
|
59 |
|
47 |
% |
47 |
% |
||||
International |
|
32 |
|
28 |
|
32 |
|
28 |
|
14 |
% |
14 |
% |
||||
Total |
|
119 |
|
87 |
|
119 |
|
87 |
|
37 |
% |
37 |
% |
||||
Our sales and marketing expenses increased $1.0 million, or 26%, for the three months ended June 30, 2010 compared to the three months ended June 30, 2009 and $2.0 million, or 25%, for the six months ended June 30, 2010 compared to the six months ended June 30, 2009. The increase in sales and marketing expenses for both the three and six month periods was primarily attributable to increases in headcount related costs, including stock-based compensation expense.
Technology
|
|
Three Months Ended |
|
Six Months Ended |
|
Three |
|
Six |
|
||||||||
|
|
June 30, |
|
June 30, |
|
Month |
|
Month |
|
||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
% Change |
|
% Change |
|
||||
|
|
(Dollars in thousands) |
|
|