Table of Contents

 

 

 

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, 2012

 

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to            

 

Commission File Number: 001-34357

 


 

OPENTABLE, INC.

(Exact Name of Registrant as Specified in Its Charter)

 


 

Delaware

 

94-3374049

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

799 Market Street, 4th Floor, San Francisco, CA

 

94103

(Address of Principal Executive Offices)

 

(Zip Code)

 

(415) 344-4200

(Registrant’s 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 x 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 x

 

Accelerated filer o

 

 

 

Non-accelerated filer o
(Do not check if a smaller reporting company)

 

Smaller reporting company o

 

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, 2012, 22,602,542 shares of the registrant’s common stock were outstanding.

 

 

 



Table of Contents

 

OPENTABLE, Inc.

Table of Contents

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Income

4

 

Condensed Consolidated Statements of Comprehensive Income

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

Signatures

30

 

2



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

 

OPENTABLE, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

57,543,000

 

$

36,519,000

 

Short-term investments

 

14,344,000

 

13,411,000

 

Accounts receivable, net of allowance for doubtful accounts of $1,323,000, and $1,315,000 at June 30, 2012 and December 31, 2011

 

18,760,000

 

18,795,000

 

Prepaid expenses and other current assets

 

3,299,000

 

2,708,000

 

Deferred tax asset

 

11,089,000

 

11,238,000

 

 

 

 

 

 

 

Total current assets

 

105,035,000

 

82,671,000

 

 

 

 

 

 

 

Property, equipment and software, net

 

17,968,000

 

16,150,000

 

Goodwill

 

42,705,000

 

42,312,000

 

Intangibles, net

 

14,637,000

 

16,403,000

 

Deferred tax asset

 

9,063,000

 

5,466,000

 

Other assets

 

1,038,000

 

813,000

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

190,446,000

 

$

163,815,000

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable

 

$

1,567,000

 

$

2,210,000

 

Accrued expenses

 

4,640,000

 

4,794,000

 

Accrued compensation

 

5,063,000

 

4,518,000

 

Deferred revenue

 

1,620,000

 

1,752,000

 

Dining rewards payable

 

24,379,000

 

20,827,000

 

Total current liabilities

 

37,269,000

 

34,101,000

 

 

 

 

 

 

 

Deferred revenue — non-current

 

2,252,000

 

2,249,000

 

Deferred tax liability

 

3,515,000

 

3,915,000

 

Income tax liability

 

13,635,000

 

13,215,000

 

Other long-term liabilities

 

63,000

 

108,000

 

 

 

 

 

 

 

Total liabilities

 

56,734,000

 

53,588,000

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 5)

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

Common stock, $0.0001 par value — 100,000,000 shares authorized; 24,121,821 and 24,009,404 shares issued, 22,600,601 and 22,709,857 shares outstanding at June 30, 2012 and December 31, 2011

 

2,000

 

2,000

 

Additional paid-in capital

 

192,641,000

 

171,465,000

 

Treasury stock, at cost (1,521,220 and 1,299,547 shares at June 30, 2012 and December 31, 2011)

 

(50,673,000

)

(41,963,000

)

Accumulated other comprehensive loss

 

(1,176,000

)

(1,634,000

)

Accumulated deficit

 

(7,082,000

)

(17,643,000

)

 

 

 

 

 

 

Total stockholders’ equity

 

133,712,000

 

110,227,000

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

190,446,000

 

$

163,815,000

 

 

See notes to condensed consolidated financial statements (unaudited).

 

3



Table of Contents

 

OPENTABLE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

$

39,558,000

 

$

34,290,000

 

$

78,927,000

 

$

67,997,000

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Operations and support

 

10,338,000

 

9,686,000

 

20,858,000

 

19,158,000

 

Sales and marketing

 

8,483,000

 

6,403,000

 

17,343,000

 

14,215,000

 

Technology

 

3,610,000

 

3,531,000

 

6,858,000

 

7,578,000

 

General and administrative

 

8,250,000

 

5,148,000

 

17,601,000

 

11,010,000

 

 

 

 

 

 

 

 

 

 

 

Total costs and expenses

 

30,681,000

 

24,768,000

 

62,660,000

 

51,961,000

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

8,877,000

 

9,522,000

 

16,267,000

 

16,036,000

 

Other income, net

 

13,000

 

24,000

 

30,000

 

45,000

 

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

8,890,000

 

9,546,000

 

16,297,000

 

16,081,000

 

Income tax expense

 

3,145,000

 

3,221,000

 

5,736,000

 

5,571,000

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

5,745,000

 

$

6,325,000

 

$

10,561,000

 

$

10,510,000

 

 

 

 

 

 

 

 

 

 

 

Net income per share (See Note 7):

 

 

 

 

 

 

 

 

 

Basic

 

$

0.25

 

$

0.27

 

$

0.47

 

$

0.45

 

Diluted

 

$

0.25

 

$

0.26

 

$

0.46

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

22,578,000

 

23,558,000

 

22,557,000

 

23,446,000

 

Diluted

 

23,169,000

 

24,615,000

 

23,164,000

 

24,573,000

 

 

See notes to condensed consolidated financial statements (unaudited).

 

4



Table of Contents

 

OPENTABLE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

5,745,000

 

$

6,325,000

 

$

10,561,000

 

$

10,510,000

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

(1,465,000

)

(51,000

)

460,000

 

2,033,000

 

Unrealized gain (loss) on investments

 

 

7,000

 

(2,000

)

7,000

 

Other comprehensive gain (loss)

 

(1,465,000

)

(44,000

)

458,000

 

2,040,000

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME

 

$

4,280,000

 

$

6,281,000

 

$

11,019,000

 

$

12,550,000

 

 

See notes to condensed consolidated financial statements (unaudited).

 

5



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OPENTABLE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

10,561,000

 

$

10,510,000

 

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

 

 

 

 

 

Depreciation and amortization

 

4,357,000

 

3,788,000

 

Amortization of intangibles

 

1,949,000

 

1,993,000

 

Provision for doubtful accounts

 

1,154,000

 

822,000

 

Stock-based compensation

 

11,177,000

 

4,840,000

 

Write-off of property, equipment and software

 

181,000

 

723,000

 

Deferred taxes

 

(3,433,000

)

 

Excess tax benefit related to stock compensation

 

(7,948,000

)

(1,912,000

)

Change in contingent liability

 

(21,000

)

(1,085,000

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(1,102,000

)

(2,917,000

)

Prepaid expenses and other current assets

 

(778,000

)

(338,000

)

Accounts payable and accrued expenses

 

7,749,000

 

2,587,000

 

Accrued compensation

 

559,000

 

198,000

 

Deferred revenue

 

(128,000

)

(48,000

)

Long-term liabilities

 

(56,000

)

3,532,000

 

Dining rewards payable

 

3,551,000

 

2,678,000

 

 

 

 

 

 

 

Net cash provided by operating activities

 

27,772,000

 

25,371,000

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Purchases of property, equipment and software

 

(6,659,000

)

(4,652,000

)

Purchases of investments

 

(10,315,000

)

(18,196,000

)

Sales of investments

 

9,330,000

 

8,228,000

 

Decrease in restricted cash

 

 

176,000

 

 

 

 

 

 

 

Net cash used in investing activities

 

(7,644,000

)

(14,444,000

)

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

Excess tax benefit related to stock-based compensation

 

7,948,000

 

1,912,000

 

Proceeds from issuance of common stock upon exercise of employee stock options

 

1,736,000

 

3,817,000

 

Repurchases of common stock

 

(8,710,000

)

 

 

 

 

 

 

 

Net cash provided by financing activities

 

974,000

 

5,729,000

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATES ON CASH

 

(78,000

)

60,000

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

21,024,000

 

16,716,000

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS — Beginning of period

 

36,519,000

 

33,444,000

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS — End of period

 

$

57,543,000

 

$

50,160,000

 

 

 

 

 

 

 

 

 

(Continued)

 

 

 

 

6



Table of Contents

 

OPENTABLE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

 

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW INFORMATION:

Cash paid for income taxes

 

$

1,105,000

 

$

122,000

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

Purchase of property, equipment and software recorded in accounts payable and accrued expenses

 

$

350,000

 

$

390,000

 

 

 

 

 

 

 

Vesting of early exercised stock options

 

$

1,000

 

$

541,000

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements (unaudited).

 

(Concluded)

 

 

 

 

 

7



Table of Contents

 

OPENTABLE, INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

1. Organization and Description of Business

 

OpenTable, Inc. (together with its subsidiaries, including toptable.co.uk Ltd. (“toptable”), “OpenTable” or the “Company”), was incorporated on October 13, 1998, and is a Delaware corporation. The Company provides solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. For restaurant customers, the Company provides a proprietary Electronic Reservation Book, or ERB, and Connect. The ERB combines proprietary software and computer hardware to deliver a solution that computerizes restaurant host-stand operations and replaces traditional pen-and-paper reservation books. The ERB streamlines and enhances a number of business-critical functions and processes for restaurants, including reservation management, table management, guest recognition and email marketing. For restaurants that do not require the operational benefits of the ERB, OpenTable offers Connect, a web-based solution that enables participating restaurants to receive reservations from OpenTable websites and mobile applications as well as the websites and mobile applications of OpenTable’s partners and restaurant customers. For diners, the Company operates www.opentable.com and www.toptable.co.uk, popular restaurant reservation websites, and also provides a variety of mobile applications. The Company refers to www.opentable.com, www.toptable.co.uk and related websites as the OpenTable websites. The OpenTable websites and mobile applications enable diners to find, choose and book tables at restaurants on the OpenTable network that use the ERB and Connect in real time, 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’s 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 websites 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 of America (“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 consolidated 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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as filed on February 24, 2012 with the SEC (the “2011 Annual Report”). The condensed consolidated balance sheet as of December 31, 2011, included herein was derived from the audited consolidated financial statements as of that date but does not include all disclosures required by GAAP, including notes to the consolidated financial statements.

 

8



Table of Contents

 

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 Company’s statement of financial position at June 30, 2012 and December 31, 2011, and the Company’s results of operations for the three and six months ended June 30, 2012 and 2011, and its cash flows for the six months ended June 30, 2012 and 2011. The results for the three and six months ended June 30, 2012 are not necessarily indicative of the results to be expected for any future period. All references to June 30, 2012 or to the three or six months ended June 30, 2012 and 2011 in the notes to the condensed consolidated financial statements are unaudited.

 

Use of Estimates

 

The preparation of the Company’s 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 June 2011, the FASB issued Topic 220—Presentation of Comprehensive Income (Topic 220). Topic 220 eliminates the option to report other comprehensive income and its components in the statement of changes in equity. Topic 220 requires that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance, which must be applied retroactively, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with earlier adoption permitted. The adoption of this standard changed the presentation of the Company’s consolidated financial statements but had no effect on the reported amounts of comprehensive net income.

 

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Intangibles-Goodwill and Other (Topic 350)—Testing Goodwill for Impairment. Topic 350 is intended to simplify goodwill impairment testing by adding a qualitative review step to assess whether the quantitative impairment analysis under the Standard is necessary. Topic 350 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. Topic 350 is effective for interim and annual periods beginning after December 15, 2011. The Company performs its annual impairment testing of goodwill in the third quarter of each year, and does not expect the application of this Standard to have an impact on its reported results of operations.

 

9



Table of Contents

 

3. Short-Term Investments and Fair Value Measurements

 

Short-term investments are summarized as follows:

 

 

 

Cost

 

Gains

 

Losses

 

Market Value

 

 

 

 

 

 

 

 

 

 

 

At June 30, 2012:

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

7,907,000

 

$

2,000

 

$

(1,000

)

$

7,908,000

 

Certificates of deposit

 

3,115,000

 

 

 

3,115,000

 

Corporate bonds

 

2,622,000

 

 

(1,000

)

2,621,000

 

Commercial paper

 

700,000

 

 

 

700,000

 

Total

 

$

14,344,000

 

$

2,000

 

$

(2,000

)

$

14,344,000

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Estimated Fair

 

 

 

Cost

 

Gains

 

Losses

 

Market Value

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2011:

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

10,538,000

 

$

3,000

 

$

(1,000

)

$

10,540,000

 

Certificates of deposit

 

2,871,000

 

 

 

2,871,000

 

Total

 

$

13,409,000

 

$

3,000

 

$

(1,000

)

$

13,411,000

 

 

As of June 30, 2012, certain investments with a total estimated fair value of $4,200,000 had maturity dates of greater than one year. As of December 31, 2011, there were no investments that had maturity dates of greater than one year.

 

The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, and defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

·                  Level 1 — Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

·                  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; 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 valuation of Level 3 investments requires the use of significant management judgments or estimation.

 

10



Table of Contents

 

In accordance with Topic 820—Fair Value Measurements and Disclosures, the following table represents the Company’s fair value hierarchy for its financial assets:

 

 

 

June 30, 2012

 

December 31, 2011

 

 

 

Aggregate

 

 

 

 

 

Aggregate

 

 

 

 

 

 

 

Fair Value

 

Level 1

 

Level 2

 

Fair Value

 

Level 1

 

Level 2

 

U.S. government and agency securities

 

$

7,908,000

 

$

 

$

7,908,000

 

$

10,540,000

 

$

 

$

10,540,000

 

Certificates of deposit

 

3,115,000

 

 

3,115,000

 

2,871,000

 

 

2,871,000

 

Corporate bonds

 

2,621,000

 

 

2,621,000

 

 

 

 

Commercial paper

 

700,000

 

 

700,000

 

 

 

 

Total short-term investments

 

$

14,344,000

 

$

 

$

14,344,000

 

$

13,411,000

 

$

 

$

13,411,000

 

 

The Company chose not to elect the fair value option as prescribed by ASC Topic 825—Financial Instruments 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. Goodwill and Intangible Assets

 

As of June 30, 2012, goodwill included $38,144,000 resulting from the acquisition of toptable (adjusted by $506,000 for the change in foreign currency exchange rates from the date of acquisition through June 30, 2012), $2,756,000 resulting from the acquisition of Table Maestro, LLC, and $1,805,000 resulting from the acquisition of GuestBridge, Inc. A summary of the carrying amount of goodwill by business segment as of June 30, 2012 and December 31, 2011 is as follows:

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

North America

 

$

4,561,000

 

$

4,561,000

 

International

 

38,144,000

 

37,751,000

 

 

 

 

 

 

 

Total Goodwill

 

$

42,705,000

 

$

42,312,000

 

 

A summary of intangible assets as of June 30, 2012 and December 31, 2011 is as follows:

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

 

 

Gross Carrying

 

Accumulated

 

 

 

Gross Carrying

 

Accumulated

 

 

 

 

 

Value

 

Amortization

 

Total

 

Value

 

Amortization

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks - finite life

 

$132,000

 

$65,000

 

$67,000

 

$132,000

 

$51,000

 

$81,000

 

Trademarks - indefinite life

 

11,875,000

 

 

11,875,000

 

11,752,000

 

 

11,752,000

 

Customer relationships

 

8,166,000

 

5,648,000

 

2,518,000

 

8,091,000

 

4,042,000

 

4,049,000

 

Developed technology

 

1,527,000

 

1,350,000

 

177,000

 

1,514,000

 

993,000

 

521,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total intangible assets

 

$21,700,000

 

$7,063,000

 

$14,637,000

 

$21,489,000

 

$5,086,000

 

$16,403,000

 

 

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Amortization of intangible assets was $978,000 and $1,005,000 for the three months ended June 30, 2012 and 2011, respectively. Amortization of intangible assets was $1,949,000 and $1,993,000 for the six months ended June 30, 2012 and 2011, respectively. Based on the current amount of intangibles subject to amortization, estimated future annual amortization expense is as follows: 2012 (remainder): $1,385,000; 2013: $1,311,000; 2014: $66,000.

 

5. Commitments and Contingencies

 

The Company leases its facilities under operating leases. Leases expire at various dates through 2016. 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

 

The Company is subject to various legal proceedings and claims arising in the ordinary course of business. Although occasional adverse decisions or settlements may occur, management believes that the final disposition of such matters will not have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

 

6. Stockholders’ Equity

 

Treasury Stock

 

In November 2011, the Board of Directors authorized the Company to purchase up to $50 million of its outstanding common stock.  In January 2012, the Company completed the repurchase program with the purchase of 221,763 shares of stock for $8,710,000.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation under Topic 718—Stock Compensation (Topic 718), 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, the fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.

 

The following table summarizes the assumptions relating to the Company’s stock options for the three and six months ended June 30, 2012 and 2011, respectively:

 

 

 

Three Months

 

Six Months

 

 

 

Ended

 

Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Dividend yield

 

0%

 

0%

 

0%

 

0%

 

Volatility

 

52.9-54.7%

 

53.0%

 

52.0-54.7%

 

53.0%

 

Risk-free interest rate

 

0.82%-0.97%

 

1.77%-2.08%

 

0.82%-1.27%

 

1.77%-2.67%

 

Expected term, in years

 

5.50-6.02

 

5.50-5.52

 

5.27-6.55

 

5.50-6.08

 

 

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The Company granted 132,351 and 107,790 stock options during the three months ended June 30, 2012 and 2011, respectively, and 1,210,909 and 108,390 stock options during the six months ended June 30, 2012 and 2011, respectively. The Company recorded stock-based compensation expense related to stock options of $4,984,000 and $1,118,000 for three months ended June 30, 2012 and 2011, respectively, and $9,899,000 and $3,843,000 for the six months ended June 30, 2012 and 2011, 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 months ended June 30, 2012 and 2011, the Company recorded $4,995,000 and $1,576,000, respectively, of excess tax benefits from stock-based compensation and $7,948,000 and $1,912,000, for the six months ended June 30, 2012 and 2011, respectively.

 

Restricted Stock Units

 

The Company began granting restricted stock units (“RSUs”) to its employees in November 2010. The cost of RSUs is determined using the fair value of the Company’s common stock on the date of grant. RSUs typically vest and become exercisable annually, based on a one to four year total vesting term. Stock-based compensation expense is amortized using a graded vesting attribution method over the requisite service period.

 

The Company granted 89,573 and 23,736 RSUs during the three months ended June 30, 2012 and 2011, respectively, and 95,797 and 35,246 RSUs during the six months ended June 30, 2012 and 2011, respectively. The Company recorded stock-based compensation expense related to RSUs of $269,000 and $718,000 for the three months ended June 30, 2012 and 2011, respectively, and $1,278,000 and $997,000 for the six months ended June 30, 2012 and 2011, respectively.

 

7. Net Income Per Share

 

The Company calculates net income per share in accordance with Topic 260—Earnings per Share. Basic and diluted net income per share attributable to common stockholders is presented in conformity with the “two-class method” required for participating securities. The Company’s weighted average unvested shares subject to repurchase and settlement 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 in all presented periods. As of June 30, 2012, the Company had a negligible amount of unvested shares remaining.

 

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. 98,000 and 220,000 shares were excluded from the dilutive shares outstanding for the three months ended June 30, 2012 and 2011, and 98,000 and 220,000 for the six months ended June 30, 2012 and 2011, respectively, as the performance criteria had not been met as of the respective dates.

 

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Anti-dilutive shares in the amounts of 1,271,000 and 18,000 were excluded from the dilutive shares outstanding for the three months ended June 30, 2012 and 2011, respectively. Anti-dilutive shares in the amounts of 1,407,000 and 80,000 were excluded from the dilutive shares outstanding for the six months ended June 30, 2012 and 2011, 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,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Basic net income per common share calculation:

 

 

 

 

 

 

 

 

 

Net income

 

$

5,745,000

 

$

6,325,000

 

$

10,561,000

 

$

10,510,000

 

Less: Undistributed earnings allocated to participating securities

 

 

(5,000

)

 

(19,000

)

Net income attributable to common shares - basic

 

$

5,745,000

 

$

6,320,000

 

$

10,561,000

 

$

10,491,000

 

Basic weighted average common shares outstanding

 

22,578,000

 

23,558,000

 

22,557,000

 

23,446,000

 

Basic net income per share

 

$

0.25

 

$

0.27

 

$

0.47

 

$

0.45

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per common share calculation:

 

 

 

 

 

 

 

 

 

Net income

 

$

5,745,000

 

$

6,325,000

 

$

10,561,000

 

$

10,510,000

 

Less: Undistributed earnings allocated to participating securities

 

 

(3,000

)

 

(12,000

)

Net income attributable to common shares - diluted

 

$

5,745,000

 

$

6,322,000

 

$

10,561,000

 

$

10,498,000

 

Weighted average shares used to compute basic net income per share

 

22,578,000

 

23,558,000

 

22,557,000

 

23,446,000

 

Effect of potentially dilutive securities:

 

 

 

 

 

 

 

 

 

Unvested common shares subject to repurchase

 

 

11,000

 

 

27,000

 

Employee stock options

 

542,000

 

1,037,000

 

563,000

 

1,093,000

 

Employee stock awards

 

49,000

 

9,000

 

44,000

 

7,000

 

Weighted average shares used to compute diluted net income per share

 

23,169,000

 

24,615,000

 

23,164,000

 

24,573,000

 

Diluted net income per share

 

$

0.25

 

$

0.26

 

$

0.46

 

$

0.43

 

 

8. Income Taxes

 

During the three and six months ended June 30, 2012, the Company recorded income tax expense of $3,145,000 and $5,736,000, respectively, which resulted in an effective tax rate of 35% in each respective period. During the three and six months ended June 30, 2011, the Company recorded income tax expense of $3,221,000 and $5,571,000, respectively, which resulted in an effective tax rate of 34% and 35%, respectively. The expected tax provision derived from applying the federal statutory rate to the Company’s income before income tax provision for the three and six months ended June 30, 2012 differed from the Company’s recorded income tax provision primarily due to benefits resulting from the recognition of current year state research and development credits and the federal Domestic Manufacturing Deduction. The Company’s effective tax rate for the three and six months ended June 30, 2012 is not necessarily indicative of the effective tax rate that may be expected for fiscal year 2012.

 

Topic 740—Income Taxes prescribes that a tax position is required to meet a minimum recognition threshold before being recognized in the financial statements. The Company’s gross unrecognized tax benefits as of June 30, 2012 and December 31, 2011 were $17,835,000 and $17,648,000, respectively. As of June 30, 2012 and December 31, 2011, the Company recorded $187,000 and $200,000, respectively, of accrued interest. No significant penalties have been recorded to date.

 

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9. Comprehensive Income (Loss)

 

In accordance with Topic 220—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.

 

Accumulated other comprehensive loss of $1,176,000 as of June 30, 2012 was comprised entirely of foreign currency translation losses. Accumulated other comprehensive loss of $1,634,000 as of December 31, 2011 was comprised of $1,637,000 of foreign currency translation losses and $3,000 of unrealized gain on investments.

 

10. Segment Information

 

The Company operates in one industry—online restaurant reservations and guest management solutions. The Company has two reportable segments: North America and International, as defined by Topic 280—Segment Reporting. 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.

 

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Table of Contents

 

Summarized financial information concerning the reportable segments is as follows:

 

 

 

North America
Segment(1)

 

International
Segment

 

Total
Consolidated

 

Three months ended June 30, 2012

 

 

 

 

 

 

 

Revenues—reservations

 

$

19,721,000

 

$

2,590,000

 

$

22,311,000

 

Revenues—subscription

 

12,265,000

 

1,662,000

 

13,927,000

 

Revenues—other

 

2,486,000

 

834,000

 

3,320,000

 

Income (loss) from operations

 

11,374,000

 

(2,497,000

)

8,877,000

 

Interest income

 

17,000

 

 

17,000

 

Depreciation and amortization expense

 

1,859,000

 

1,270,000

 

3,129,000

 

Purchases of property, equipment and software

 

1,959,000

 

1,050,000

 

3,009,000

 

Three months ended June 30, 2011

 

 

 

 

 

 

 

Revenues—reservations

 

$

15,560,000

 

$

2,736,000

 

$

18,296,000

 

Revenues—subscription

 

11,090,000

 

1,472,000

 

12,562,000

 

Revenues—other

 

2,592,000

 

840,000

 

3,432,000

 

Income (loss) from operations

 

12,240,000

 

(2,718,000

)

9,522,000

 

Interest income

 

16,000

 

2,000

 

18,000

 

Depreciation and amortization expense

 

1,741,000

 

1,209,000

 

2,950,000

 

Purchases of property, equipment and software

 

1,692,000

 

742,000

 

2,434,000

 

Six months ended June 30, 2012

 

 

 

 

 

 

 

Revenues—reservations

 

$

38,935,000

 

$

5,703,000

 

$

44,638,000

 

Revenues—subscription

 

24,165,000

 

3,302,000

 

27,467,000

 

Revenues—other

 

5,095,000

 

1,727,000

 

6,822,000

 

Income (loss) from operations

 

21,354,000

 

(5,087,000

)

16,267,000

 

Interest income

 

29,000

 

 

29,000

 

Depreciation and amortization expense

 

3,548,000

 

2,758,000

 

6,306,000

 

Purchases of property, equipment and software

 

4,222,000

 

2,437,000

 

6,659,000

 

Six months ended June 30, 2011

 

 

 

 

 

 

 

Revenues—reservations

 

$

30,536,000

 

$

5,367,000

 

$

35,903,000

 

Revenues—subscription

 

21,711,000

 

2,869,000

 

24,580,000

 

Revenues—other

 

5,769,000

 

1,745,000

 

7,514,000

 

Income (loss) from operations

 

22,325,000

 

(6,289,000

)

16,036,000

 

Interest income

 

32,000

 

2,000

 

34,000

 

Depreciation and amortization expense

 

3,436,000

 

2,345,000

 

5,781,000

 

Purchases of property, equipment and software

 

3,296,000

 

1,356,000

 

4,652,000

 

 


(1)                                  A significant majority of the Company’s “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 Company’s reporting segments.

 

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Table of Contents

 

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 Company’s operations by geographic area is presented below:

 

 

 

Three Months

 

Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

United States

 

$

32,429,000

 

$

27,430,000

 

$

64,125,000

 

$

54,521,000

 

United Kingdom

 

3,902,000

 

4,149,000

 

8,429,000

 

8,272,000

 

International - all others

 

3,227,000

 

2,711,000

 

6,373,000

 

5,204,000

 

 

 

$

39,558,000

 

$

34,290,000

 

$

78,927,000

 

$

67,997,000

 

 

 

 

As of

 

As of

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

Long-lived assets(1):

 

 

 

 

 

 

 

 

 

United States

 

$

13,215,000

 

$

12,536,000

 

 

 

 

 

United Kingdom

 

3,847,000

 

2,399,000

 

 

 

 

 

International—all others

 

1,463,000

 

2,670,000

 

 

 

 

 

Total long-lived assets

 

$

18,525,000

 

$

17,605,000

 

 

 

 

 

 


(1)                                  Includes all non-current assets except deferred tax assets, goodwill, patents and intangible assets.

 

The Company had no customers that individually, or in the aggregate, exceeded 10% of revenues or accounts receivable as of and for any of the periods presented above.

 

11. Subsequent Events

 

On August 3, 2012, the Company closed the acquisition of Treat Technologies, Inc., a provider of the Treatful-branded online gift card solutions for restaurants, for approximately $4 million in cash pursuant to an agreement and plan of merger.

 

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Table of Contents

 

ITEM 2. MANAGEMENT’S 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 2011 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,” “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 2011 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 for restaurants include our proprietary Electronic Reservation Book, or ERB, and Connect. Our solutions for diners include our popular restaurant reservation websites, www.opentable.com and www.toptable.co.uk, as well as a variety of mobile applications. We refer to www.opentable.com, www.toptable.co.uk and related websites as the OpenTable websites. The OpenTable network includes more than 25,000 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 over 350 million diners through OpenTable reservations, and during the three months ended June 30, 2012, we seated an average of more than 10 million diners per month. 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 fee for each restaurant guest seated through online reservations. Diners can use our online restaurant reservation service for free. For the three months ended June 30, 2012 and 2011, our net revenues were $39.6 million and $34.3 million, respectively. For the six months ended June 30, 2012 and 2011, our net revenues were $78.9 million and $68.0 million, respectively. For the three months ended June 30, 2012 and 2011, our reservation revenues accounted for 56% and 53% of our total revenues, respectively, and 57% and 53% of total revenues for the six months ended June 30, 2012 and 2011, respectively. For the three months ended June 30, 2012 and 2011, our subscription revenues accounted for 35% and 37% of our total revenues, respectively, and 35% and 36% of revenues for the six months ended June 30, 2012 and 2011, 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, 2012 and 2011 represented 13% and 15% of our total revenues, respectively, and for the six months ended June 30, 2012 and 2011, represented 14% and 15% of our total revenues, 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.

 

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Table of Contents

 

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. Our revenues include monthly subscription fees, a fee for each restaurant guest seated through online reservations and other revenue, including installation fees for our ERB (including training). 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. Installation fees are recognized on a straight-line basis over an estimated customer life of approximately three to six years. Revenues are shown net of redeemable Dining Points issued to diners. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Dining Rewards Loyalty Program” in our 2011 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 software development costs (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Website and Software Development Costs” in our 2011 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 websites, 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, including full-time equivalent temporary employees, 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.

 

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Table of Contents

 

Income Taxes

 

We are subject to income tax in the United States as well as other tax jurisdictions in which we conduct business. Earnings from our non-U.S. activities are subject to local country income tax and may also be subject to current U.S. income tax.

 

During the three and six months ended June 30, 2012, we recorded income tax expense of $3.1 million and $5.7 million, respectively, which resulted in an effective tax rate of 35% for each respective period. During the three and six months ended June 30, 2011, we recorded income tax expense of $3.2 million and $5.6 million, respectively, which resulted in an effective tax rate of 34% and 35%, respectively. The tax provision and the effective tax rate for the three and six months ended June 30, 2012 did not differ significantly from those of the same period ended June 30, 2011. Our effective tax rates for the three and six months ended June 30, 2012 are not necessarily indicative of the effective tax rate that may be expected for fiscal year 2012.

 

Factors that impact our income tax provision include, but are not limited to, recognition of research and development tax benefits and the federal Domestic Manufacturing Deduction.

 

Critical Accounting Policies and Estimates

 

In presenting our financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), 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 described in our 2011 Annual Report. For further information on our critical and other significant accounting policies, see our 2011 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.

 

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Table of Contents

 

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,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

$

39,558

 

$

34,290

 

$

78,927

 

$

67,997

 

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Operations and support (1)

 

10,338

 

9,686

 

20,858

 

19,158

 

Sales and marketing (1)

 

8,483

 

6,403

 

17,343

 

14,215

 

Technology (1)

 

3,610

 

3,531

 

6,858

 

7,578

 

General and administrative (1)

 

8,250

 

5,148

 

17,601

 

11,010

 

 

 

 

 

 

 

 

 

 

 

Total costs and expenses

 

30,681

 

24,768

 

62,660

 

51,961

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

8,877

 

9,522

 

16,267

 

16,036

 

Other income, net

 

13

 

24

 

30

 

45

 

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

8,890

 

9,546

 

16,297

 

16,081

 

Income tax expense

 

3,145

 

3,221

 

5,736

 

5,571

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

5,745

 

$

6,325

 

$

10,561

 

$

10,510

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.25

 

$

0.27

 

$

0.47

 

$

0.45

 

Diluted

 

$

0.25

 

$

0.26

 

$

0.46

 

$

0.43

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

22,578

 

23,558

 

22,557

 

23,446

 

Diluted

 

23,169

 

24,615

 

23,164

 

24,573

 

 


(1) Stock-based compensation included in above line items:

 

Operations and support

 

$

333

 

$

446

 

$

634

 

$

858

 

Sales and marketing

 

1,375

 

493

 

2,756

 

1,003

 

Technology

 

642

 

437

 

1,164

 

888

 

General and administrative

 

2,903

 

460

 

6,623

 

2,091

 

 

 

$

5,253

 

$

1,836

 

$

11,177

 

$

4,840

 

 

 

 

 

 

 

 

 

 

 

Other Operational Data:

 

 

 

 

 

 

 

 

 

Installed restaurants (at period end):

 

 

 

 

 

 

 

 

 

North America

 

18,373

 

15,560

 

18,373

 

15,560

 

International

 

6,664

 

7,067

 

6,664

 

7,067

 

Total

 

25,037

 

22,627

 

25,037

 

22,627

 

 

 

 

 

 

 

 

 

 

 

Seated diners (in thousands):

 

 

 

 

 

 

 

 

 

North America

 

28,038

 

22,196

 

55,754

 

43,066

 

International

 

2,244

 

1,618

 

4,498

 

3,171

 

Total

 

30,282

 

23,814

 

60,252

 

46,237

 

 

 

 

 

 

 

 

 

 

 

Headcount (at period end):

 

 

 

 

 

 

 

 

 

North America

 

418

 

378

 

418

 

378

 

International

 

161

 

162

 

161

 

162

 

Total

 

579

 

540

 

579

 

540

 

 

 

 

 

 

 

 

 

 

 

Additional Financial Data:

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

North America

 

$

34,472

 

$

29,242

 

$

68,195

 

$

58,016

 

International

 

5,086

 

5,048

 

10,732

 

9,981

 

Total

 

$

39,558

 

$

34,290

 

$

78,927

 

$

67,997

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations:

 

 

 

 

 

 

 

 

 

North America

 

$

11,374

 

$

12,240

 

$

21,354

 

$

22,325

 

International

 

(2,497

)

(2,718

)

(5,087

)

(6,289

)

Total

 

$

8,877

 

$

9,522

 

$

16,267

 

$

16,036

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

North America

 

$

1,859

 

$

1,741

 

$

3,548

 

$

3,436

 

International

 

1,270

 

1,209

 

2,758

 

2,345

 

Total

 

$

3,129

 

$

2,950

 

$

6,306

 

$

5,781

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation:

 

 

 

 

 

 

 

 

 

North America

 

$

4,791

 

$

862

 

$

10,226

 

$

2,881

 

International

 

462

 

974

 

951

 

1,959

 

Total

 

$

5,253

 

$

1,836

 

$

11,177

 

$

4,840

 

 

21



Table of Contents

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(as a percentage of revenue)

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

100

%

100

%

100

%

100

%

 

 

 

 

 

 

 

 

 

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Operations and support

 

26

 

28

 

26

 

28

 

Sales and marketing

 

22

 

19

 

22

 

21

 

Technology

 

9

 

10

 

9

 

11

 

General and administrative

 

21

 

15

 

22

 

16

 

 

 

 

 

 

 

 

 

 

 

Total costs and expenses

 

78

 

72

 

79

 

76

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

22

 

28

 

21

 

24

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

22

 

28

 

21

 

24

 

Income tax expense

 

8

 

9

 

8

 

8

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

14

%

19

%

14

%

16

%

 

Revenues

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

 

 

 

 

June 30,

 

June 30,

 

Three Month

 

Six Month

 

 

 

2012

 

2011

 

2012

 

2011

 

% Change

 

% Change

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues by Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

Reservation

 

$

22,311

 

$

18,296

 

$

44,638

 

$

35,903

 

22

%

24

%

Subscription

 

13,927

 

12,562

 

27,467

 

24,580

 

11

%

12

%

Other

 

3,320

 

3,432

 

6,822

 

7,514

 

-3

%

-9

%

Total

 

$

39,558

 

$

34,290

 

$

78,927

 

$

67,997

 

15

%

16

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of Revenues by Type:

 

 

 

 

 

 

 

 

 

 

 

 

 

Reservation

 

57

%

53

%

56

%

53

%

 

 

 

 

Subscription

 

35

%

37

%

35

%

36

%

 

 

 

 

Other

 

8

%

10

%

9

%

11

%

 

 

 

 

Total

 

100

%

100

%

100

%

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues by Location:

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

34,472

 

$

29,242

 

$

68,195

 

$

58,016

 

18

%

18

%

International

 

5,086

 

5,048

 

10,732

 

9,981

 

1

%

8

%

Total

 

$

39,558

 

$

34,290

 

$

78,927

 

$

67,997

 

15

%

16

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of Revenues by Location:

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

87

%

85

%

86

%

85

%

 

 

 

 

International

 

13

%

15

%

14

%

15

%

 

 

 

 

Total

 

100

%

100

%

100

%

100

%

 

 

 

 

 

Total revenues increased $5.3 million, or 15%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 and $10.9 million, or 16%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. Reservation revenues increased $4.0 million, or 22%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 and $8.7 million, or 24%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. Reservation revenues increased as a result of the increase in seated diners. Subscription revenues increased $1.4 million, or 11%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 and $2.9 million, or 12%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. Subscription revenues increased as a result of the increase in installed restaurants. Other revenues decreased $0.1 million, or 3%, for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 and $0.7 million, or 9%, for the six months ended June 30, 2012 compared to the six months ended June 30, 2011 primarily as a result of a decrease in third-party restaurant coupon sales, partially offset by an increase in online advertising.

 

22



Table of Contents

 

Costs and Expenses

 

Operations and Support