UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
____________________________
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2015
OR
☐ |
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 001-36639
Yodlee, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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33-0843318 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
3600 Bridge Parkway, Suite 200
Redwood City, California 94065
(Address of principal executive offices and Zip Code)
(650) 980-3600
(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 ¨
Indicate by check mark 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
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files). YES x NO ¨
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 the definition of “large accelerated filer”, “accelerated
filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☐ |
|
|
|
|
Non-accelerated filer |
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☒ (Do not check if a smaller reporting company) |
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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 ¨ NO x
The number of shares of the registrant’s common stock outstanding as of October
31, 2015 was 30,876,966.
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking
statements generally relate to future events or our future financial or operating performance. In some cases, you can identify
forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,”
“plans,” “anticipates,” “could,” “intends,” “target,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “potential” or
“continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy,
plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to,
statements about:
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• |
our ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytics solutions and market research services and premium FinApps; |
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our financial performance; |
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sources of our future revenue; |
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the results of our investments in research and development, our data center and other infrastructure; |
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our ability to realize operating efficiencies; |
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the advantages of our solutions as compared to those of others; |
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our ability to establish and maintain intellectual property rights;
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our ability to develop additional applications and services;
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the ability of our products to accomplish the objectives for which they are designed;
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our ability to grow our business as planned, both domestically and internationally;
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our plans to invest in our data center and other infrastructure; and |
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our ability to retain and hire necessary employees and appropriately staff our operations, in particular our India operations. |
We caution you that the foregoing list may not contain all of the forward-looking
statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of
future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current
expectations and projections about future events and trends that we believe may affect our business, financial condition, results
of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties
and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time
and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements
contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the
forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from
those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form
10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking
statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report
on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually
achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance
on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures or investments we may make.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Yodlee, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
(Unaudited)
| |
September 30, 2015 | |
December 31, 2014 |
Assets | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 73,095 | | |
$ | 73,520 | |
Accounts receivable, net of allowance for doubtful accounts of $23 and $13 as of September 30, 2015 and December 31, 2014, respectively | |
| 16,921 | | |
| 12,229 | |
Accounts receivable—related parties | |
| 1,496 | | |
| 3,066 | |
Prepaid expenses and other current assets | |
| 6,877 | | |
| 4,425 | |
Total current assets | |
| 98,389 | | |
| 93,240 | |
Property and equipment, net | |
| 10,780 | | |
| 9,481 | |
Restricted cash | |
| 146 | | |
| 146 | |
Goodwill | |
| 3,068 | | |
| 3,068 | |
Other assets | |
| 1,869 | | |
| 1,609 | |
Total assets | |
$ | 114,252 | | |
$ | 107,544 | |
Liabilities and stockholders’ equity | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 4,667 | | |
$ | 3,278 | |
Accrued liabilities | |
| 4,103 | | |
| 2,628 | |
Accrued compensation | |
| 8,165 | | |
| 8,927 | |
Deferred revenue, current portion | |
| 8,052 | | |
| 6,959 | |
Capital lease obligations, current portion | |
| 870 | | |
| 1,153 | |
Total current liabilities | |
| 25,857 | | |
| 22,945 | |
Deferred revenue, net of current portion | |
| 127 | | |
| 293 | |
Capital lease obligations, net of current portion | |
| 666 | | |
| 1,243 | |
Other long-term liabilities | |
| 4,114 | | |
| 2,986 | |
Total liabilities | |
| 30,764 | | |
| 27,467 | |
Stockholders’ equity: | |
| | | |
| | |
Common stock, $0.001 par value—150,000 shares authorized as of September 30, 2015 and December 31, 2014; 30,750 and 29,264 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| 31 | | |
| 29 | |
Preferred stock, $0.001 par value—5,000 shares authorized as of September 30, 2015 and December 31, 2014; none issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| – | | |
| – | |
Additional paid-in capital | |
| 451,925 | | |
| 439,275 | |
Accumulated other comprehensive loss | |
| (2,418 | ) | |
| (1,979 | ) |
Accumulated deficit | |
| (366,050 | ) | |
| (357,248 | ) |
Total stockholders’ equity | |
| 83,488 | | |
| 80,077 | |
Total liabilities and stockholders’ equity | |
$ | 114,252 | | |
$ | 107,544 | |
See accompanying notes.
Yodlee, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Revenue(1): | |
| | | |
| | | |
| | | |
| | |
Subscription | |
$ | 25,262 | | |
$ | 19,787 | | |
$ | 69,400 | | |
$ | 54,690 | |
Professional services and other | |
| 3,305 | | |
| 3,366 | | |
| 9,731 | | |
| 9,530 | |
Total revenue | |
| 28,567 | | |
| 23,153 | | |
| 79,131 | | |
| 64,220 | |
Cost of revenue(2): | |
| | | |
| | | |
| | | |
| | |
Subscription | |
| 7,813 | | |
| 6,728 | | |
| 22,514 | | |
| 18,127 | |
Professional services and other | |
| 2,200 | | |
| 2,263 | | |
| 6,870 | | |
| 6,655 | |
Total cost of revenue | |
| 10,013 | | |
| 8,991 | | |
| 29,384 | | |
| 24,782 | |
Gross profit | |
| 18,554 | | |
| 14,162 | | |
| 49,747 | | |
| 39,438 | |
Operating expenses(2): | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 7,357 | | |
| 6,225 | | |
| 21,146 | | |
| 16,485 | |
Sales and marketing | |
| 7,670 | | |
| 5,966 | | |
| 21,876 | | |
| 15,657 | |
General and administrative | |
| 6,339 | | |
| 3,018 | | |
| 14,374 | | |
| 8,537 | |
Total operating expenses | |
| 21,366 | | |
| 15,209 | | |
| 57,396 | | |
| 40,679 | |
Operating income (loss) | |
| (2,812 | ) | |
| (1,047 | ) | |
| (7,649 | ) | |
| (1,241 | ) |
Other income, net | |
| 161 | | |
| (40 | ) | |
| 509 | | |
| 47 | |
Income (loss) before provision for income taxes | |
| (2,651 | ) | |
| (1,087 | ) | |
| (7,140 | ) | |
| (1,194 | ) |
Provision for income taxes | |
| 564 | | |
| 532 | | |
| 1,662 | | |
| 1374 | |
Net loss | |
$ | (3,215 | ) | |
$ | (1,619 | ) | |
$ | (8,802 | ) | |
$ | (2,568 | ) |
Net loss per share attributable to common stockholders: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
$ | (0.11 | ) | |
$ | (0.21 | ) | |
$ | (0.29 | ) | |
$ | (0.34 | ) |
Weighted average shares used to compute net loss per share attributable to common stockholders—basic and diluted | |
| 30,505 | | |
| 7,678 | | |
| 29,932 | | |
| 7,572 | |
(1) |
The Company recorded revenue totaling $2.4 million and $3.6 million from related parties during the three months ended September 30, 2015 and 2014, respectively, and $7.5 million and $9.9 million during the nine months ended September 30, 2015 and 2014, respectively. Refer to Note 11 to these consolidated financial statements for further information. |
(2) |
Amounts include stock-based compensation expense as follows (in thousands): |
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Cost of revenue—subscription | |
$ | 282 | | |
$ | 249 | | |
$ | 871 | | |
$ | 348 | |
Cost of revenue—professional services and other | |
| 163 | | |
| 142 | | |
| 441 | | |
| 206 | |
Research and development | |
| 581 | | |
| 314 | | |
| 1,452 | | |
| 442 | |
Sales and marketing | |
| 581 | | |
| 391 | | |
| 1,648 | | |
| 563 | |
General and administrative | |
| 1,026 | | |
| 731 | | |
| 2,683 | | |
| 1187 | |
Total stock-based compensation expense | |
$ | 2,633 | | |
$ | 1,827 | | |
$ | 7,095 | | |
$ | 2,746 | |
See accompanying notes.
Yodlee, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(Unaudited)
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Net loss | |
$ | (3,215 | ) | |
$ | (1,619 | ) | |
$ | (8,802 | ) | |
$ | (2,568 | ) |
Other comprehensive income, net of taxes: | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation gain (loss) | |
| (188 | ) | |
| (180 | ) | |
| (274 | ) | |
| (30 | ) |
Change in unrealized gain (loss) on foreign currency contracts designated as cash flow hedges | |
| (223 | ) | |
| (283 | ) | |
| (165 | ) | |
| 120 | |
Total other comprehensive income (loss), net of taxes | |
| (411 | ) | |
| (463 | ) | |
| (439 | ) | |
| 90 | |
Comprehensive loss | |
$ | (3,626 | ) | |
$ | (2,082 | ) | |
$ | (9,241 | ) | |
$ | (2,478 | ) |
See accompanying notes.
Yodlee, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| |
Nine Months Ended September 30, |
| |
2015 | |
2014 |
Cash flows from operating activities | |
| | | |
| | |
Net loss | |
$ | (8,802 | ) | |
$ | (2,568 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 3,605 | | |
| 2,621 | |
Revaluation of warrant liabilities | |
| – | | |
| 149 | |
Stock-based compensation expense | |
| 7,095 | | |
| 2,746 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable, net | |
| (3,123 | ) | |
| (1,539 | ) |
Prepaid expenses and other assets | |
| (3,032 | ) | |
| (2,153 | ) |
Accounts payable | |
| 919 | | |
| 999 | |
Accrued liabilities and other long term liabilities | |
| 2,494 | | |
| 414 | |
Accrued compensation | |
| (701 | ) | |
| 503 | |
Deferred revenue | |
| 927 | | |
| (614 | ) |
Net cash used in operating activities | |
| (618 | ) | |
| 558 | |
Cash flows from investing activities | |
| | | |
| | |
Purchases of property and equipment | |
| (4,380 | ) | |
| (4,003 | ) |
Net cash used in investing activities | |
| (4,380 | ) | |
| (4,003 | ) |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from bank borrowings | |
| – | | |
| 6,600 | |
Principal payments on bank borrowings | |
| – | | |
| (3,373 | ) |
Proceeds from issuance of common stock upon exercise of stock options | |
| 6,625 | | |
| 1,241 | |
Tax payments related to stock-based award activities | |
| (1,049 | ) | |
| – | |
Principal payments on capital lease obligations | |
| (860 | ) | |
| (660 | ) |
Equity offering costs | |
| (143 | ) | |
| (1,242 | ) |
Repurchase of common stock | |
| – | | |
| (473 | ) |
Net cash provided by financing activities | |
| 4,573 | | |
| 2,093 | |
Net decrease in cash and cash equivalents | |
| (425 | ) | |
| (1,352 | ) |
Cash and cash equivalents—beginning of period | |
| 73,520 | | |
| 8,134 | |
Cash and cash equivalents—end of period | |
$ | 73,095 | | |
$ | 6,782 | |
Supplemental disclosures of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | 92 | | |
$ | 454 | |
Cash paid for income taxes | |
$ | 1,204 | | |
$ | 704 | |
Supplemental disclosures of non-cash investing and financing information: | |
| | | |
| | |
Property and equipment financed through capital lease | |
$ | – | | |
$ | 1,804 | |
Property and equipment purchased but not paid at period-end | |
$ | 1,277 | | |
$ | 106 | |
Unpaid equity offering costs | |
$ | – | | |
$ | 2,544 | |
See accompanying notes.
Yodlee, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of Business and Summary of Significant Accounting Policies
Yodlee, Inc. (“Yodlee” or the “Company”) is a
technology and applications platform powering digital financial services in the cloud. The Company refers to its platform as the
Yodlee Financial Cloud. The Yodlee Financial Cloud delivers a wide variety of financial applications (“FinApps”) targeted
at the retail financial, wealth management, small business, card and other financial solutions sectors. The Company was incorporated
in the state of Delaware in February 1999 and is headquartered in Redwood City, California. The Company has wholly-owned subsidiaries
in India, Canada and Australia.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”)
and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim
financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance
with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited interim condensed
consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related
notes presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There have been no changes
in the Company’s significant accounting policies from those that were disclosed in the Company’s audited consolidated
financial statements for the fiscal year ended December 31, 2014.
The unaudited condensed consolidated financial statements include the
accounts of Yodlee and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated
financial statements and reflect, in management’s opinion, all adjustments of a normal, recurring nature that are necessary
for the fair statement of the Company’s financial position, results of operations and cash flows for the interim periods,
but are not necessarily indicative of the results expected for the full fiscal year or any other period.
The condensed consolidated balance sheet as of December 31, 2014 has
been derived from the audited consolidated financial statements at that date but does not include all of the information and notes
required by generally accepted accounting principles for complete financial statements.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. The Company bases its estimates
on historical experience and on assumptions that the Company believes are reasonable. The Company assesses these estimates on a
regular basis; however, actual results could materially differ from those estimates and such differences could be material to the
Company’s consolidated financial position and results of operations.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”)
issued an accounting standard update on revenue from contracts with customers, which requires an entity to recognize the amount
of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new guidance will
replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued an accounting
standard update which defers the effective date by one year while providing the option to adopt the standard on the original effective
date. As a result, the new standard is effective for the Company on January 1, 2018. The standard permits the use of either
the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that the new guidance
will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method
nor has it determined the effect of the standard on its ongoing financial reporting.
In June 2014, the FASB issued a new accounting standard update on stock-based
compensation when the terms of an award provide that a performance target could be achieved after the requisite service period.
The new guidance requires that a performance target that affects vesting, and that could be achieved after the requisite service
period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant
date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which
it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the
periods for which the requisite service has already been rendered. The new standard is effective for the Company on January 1,
2016 and can be applied either prospectively or retrospectively to all awards outstanding as of the beginning of the earliest annual
period presented as an adjustment to opening retained earnings. Early adoption is permitted. Adoption of this new accounting standard
update is expected to have no impact to the Company’s financial statements.
In August 2014, the FASB issued a new accounting standard update which
requires management to assess an entity’s ability to continue as a going concern and to provide related disclosures in certain
circumstances. Under the new guidance, disclosures are required when conditions give rise to substantial doubt about an entity’s
ability to continue as a going concern within one year from the financial statement issuance date. The new standard is effective
for the Company on January 1, 2017. Early application is permitted. The adoption of this guidance is not expected to have
any impact on the Company’s financial position and results of operations and, at this time, the Company does not expect any
impact on its disclosures.
In January 2015, the FASB
eliminated the concept of extraordinary items (Subtopic 225-20) as part of its initiative
to reduce complexity in accounting standards (the Simplification Initiative). This amendment aims to save time and reduce costs
for preparers because they will not have to assess whether a particular event or transaction event is extraordinary (even if they
ultimately would conclude it is not). The new standard is effective for the Company on January 1, 2016.
A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to
all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from
the beginning of the fiscal year of adoption. The adoption of this guidance is not expected to have any impact on the Company’s
financial position and results of operations and, at this time, the Company does not expect any impact on its disclosures.
In February 2015, the FASB issued
an accounting standard update on consolidation which addressed the current accounting for consolidation of certain legal entities.
The new guidance places more emphasis in the consolidation evaluation on variable interests other than fee arrangements such as
principal investment risk, guarantees of the value of the assets or liabilities of variable interest entities (“VIEs”),
written put options on the assets of VIEs, or similar obligations, including some liquidity commitments or agreements (explicit
or implicit). Additionally, the amendments in this update reduce the extent to which related party arrangements cause an entity
to be considered a primary beneficiary. The new standard is effective for the Company on January 1, 2017
and may be retrospectively applied using a simple or modified approach, recording a cumulative-effect adjustment to equity as of
the beginning of the fiscal year of adoption. The adoption of this guidance is not expected to have any impact on the Company’s
financial position and results of operations and, at this time, the Company does not expect any impact on its disclosures.
In April 2015, the FASB issued
an accounting standard update on intangibles, goodwill and other internal use software which addressed the lack of guidance about
a customer’s accounting for fees in a cloud computing arrangement. The new guidance requires that if a cloud computing arrangement
includes a software license, then the customer should account for the software license element of the arrangement consistent with
the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer
should account for the arrangement as a service contract. The new standard is effective for the Company on January 1,
2016 and can be applied either prospectively to all arrangements entered into or materially
modified after the effective date or retrospectively. The adoption of this guidance is not expected to have any impact on the Company’s
financial position and results of operations and, at this time, the Company does not expect any impact on its disclosures.
2. Fair Value Measurements
The Company measures and reports its cash equivalents and foreign currency
forward exchange contracts at fair value. Fair value is defined as the exchange price that would be received for an asset or an
exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable
inputs and minimize the use of unobservable inputs.
The fair value hierarchy defines a three-level valuation hierarchy for
disclosure of fair value measurements as follows:
Level I—Inputs are unadjusted quoted prices in active markets for
identical assets or liabilities.
Level II—Inputs other than quoted prices included within Level
I that are observable, unadjusted 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 related assets or liabilities.
Level III—Unobservable inputs that are supported by little or no
market activity for the related assets or liabilities and typically reflect management’s estimate of assumptions that market
participants would use in pricing the assets or liabilities.
The categorization of a financial instrument within the valuation hierarchy
is based upon the lowest level of input that is significant to the fair value measurement.
The following tables set forth the fair value of the Company’s
financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014
based on the three-tier fair value hierarchy (in thousands):
| |
As of September 30, 2015 |
| |
Fair Value | |
Level I | |
Level II |
Assets | |
| | | |
| | | |
| | |
Money market funds(1) | |
$ | 66,476 | | |
$ | 66,476 | | |
$ | – | |
Foreign currency forwards(2) | |
| – | | |
| – | | |
| – | |
Total assets measured at fair value | |
$ | 66,476 | | |
$ | 66,476 | | |
$ | 0 | |
Liabilities | |
| | | |
| | | |
| | |
Foreign currency forwards(3) | |
| 382 | | |
| – | | |
| 382 | |
Total liabilities measured at fair value | |
$ | 382 | | |
$ | – | | |
$ | 382 | |
| |
As of December 31, 2014 |
| |
Fair Value | |
Level I | |
Level II |
Assets | |
| | | |
| | | |
| | |
Money market funds(1) | |
$ | 70,969 | | |
$ | 70,969 | | |
$ | – | |
Foreign currency forwards(2) | |
| 5 | | |
| – | | |
| 5 | |
Total assets measured at fair value | |
$ | 70,974 | | |
$ | 70,969 | | |
$ | 5 | |
Liabilities | |
| | | |
| | | |
| | |
Foreign currency forwards(3) | |
| 334 | | |
| – | | |
| 334 | |
Total liabilities measured at fair value | |
$ | 334 | | |
$ | – | | |
$ | 334 | |
(1) |
Included in cash and cash equivalents in the consolidated balance sheets. |
(2) |
Included in prepaid and other current assets in the consolidated balance sheets. |
(3) |
Included in accrued liabilities in the consolidated balance sheets. |
The Company did not have any assets or liabilities measured at fair value
on a recurring basis requiring Level 3 inputs as of September 30, 2015 or December 31, 2014.
There were no transfers of financial instruments, which are measured
at fair value, between Level I, Level II, and Level III during the three and nine months ended September 30, 2015 and 2014.
3. Derivative Financial Instruments
The Company uses foreign currency
forward contracts to reduce its exposure to foreign currency exchange rate changes of the Indian Rupee on certain forecasted operating
expenses and on certain existing assets and liabilities.
The contracts typically mature
within 12 months, and they are not held for trading purposes. The Company may designate certain of its foreign currency forward
contracts as hedging instruments subject to hedge accounting treatment. The Company records all of its derivative instruments at
their gross fair value on the condensed consolidated balance sheet, at each balance sheet date.
The accounting for changes in the
fair value of a derivative instrument depends on whether the instrument has been designated and qualifies as a cash flow hedge
for accounting purposes. For foreign currency forward contracts that are designated and qualify as hedging instruments, the effective
portion of the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive loss ("AOCI")
in stockholders’ deficit and reclassified into operating expenses and cost of revenue in the same period during which the
hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized
in other income, net in the accompanying consolidated statements of operations. To receive hedge accounting treatment, cash flow
hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. The changes in the
time value are excluded from the assessment of hedge effectiveness and are recognized in other income, net in the accompanying
consolidated statements of operations.
Gains and losses related to derivative
instruments that do not qualify for hedge accounting treatment are recognized in other income, net in the accompanying consolidated
statements of operations.
The Company classifies its cash
flows from the derivative instruments as operating activities.
Derivative instruments measured
at fair value and their classification on the consolidated balance sheets are presented in the following tables (in thousands):
| |
September 30, 2015 | |
December 31, 2014 |
| |
Notional Amount | |
Fair Value | |
Notional Amount | |
Fair Value |
Derivative instruments included in prepaid and other current assets: | |
| | | |
| | | |
| | | |
| | |
Derivatives designated as hedging instruments | |
$ | – | | |
$ | – | | |
$ | 2,348 | | |
$ | 4 | |
Derivatives not designated as hedging instruments | |
| – | | |
| – | | |
| 935 | | |
| 1 | |
Total | |
$ | – | | |
$ | – | | |
$ | 3,283 | | |
$ | 5 | |
Derivative instruments included in accrued liabilities: | |
| | | |
| | | |
| | | |
| | |
Derivatives designated as hedging instruments | |
$ | 14,353 | | |
$ | (306 | ) | |
$ | 6,433 | | |
$ | (220 | ) |
Derivatives not designated as hedging instruments | |
| 3,403 | | |
| (76 | ) | |
| 3,222 | | |
| (114 | ) |
Total | |
$ | 17,756 | | |
$ | (382 | ) | |
$ | 9,655 | | |
$ | (334 | ) |
Gains (losses) on derivative instruments
designated as hedging instruments and their classification on the consolidated statements of operations are presented in the following
tables (in thousands):
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Gain (loss) recognized in AOCI–effective portion | |
$ | (223 | ) | |
$ | (283 | ) | |
$ | (517 | ) | |
$ | 120 | |
Gain (loss) reclassified from AOCI into net loss-effective portion(1) | |
| (206 | ) | |
| 21 | | |
| (445 | ) | |
| (172 | ) |
Gain (loss) recognized-ineffective portion and amount excluded from effectiveness testing(2) | |
| (82 | ) | |
| 122 | | |
| (25 | ) | |
| 61 | |
(1) Derivatives in Cash Flow Hedging Relationship –
Foreign currency forward contracts (in thousands):
| |
Gain (loss) reclassified from AOCI into net loss - effective portion |
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
Income Statement Location | |
2015 | |
2014 | |
2015 | |
2014 |
Cost of sales | |
$ | (90 | ) | |
$ | 10 | | |
$ | (198 | ) | |
$ | (89 | ) |
Operating expenses | |
| (116 | ) | |
| 11 | | |
| (247 | ) | |
| (83 | ) |
(2) Included in other income, net.
As of September 30, 2015 and December
31, 2014, the Company estimated that the entire net unrealized loss of $0.5 million and $0.4 million, respectively, included
in AOCI will be reclassified into earnings within the next 12 months.
The gain (loss) recognized in other
income (expense), net of foreign currency forward contracts not designated as hedging instruments amounted to ($0.1) million
for the three months ended September 30, 2015 and 2014, respectively, and ($30,000) and $0.3 million for the nine months ended
September 30, 2015 and 2014, respectively.
4. Balance Sheet Components
Allowance for Doubtful Accounts
Activity related to the allowance for doubtful accounts consisted of
the following (in thousands):
| |
Nine Months Ended September 30, 2015 | |
Year Ended December 31, 2014 |
Balance, beginning of period | |
$ | 13 | | |
$ | 20 | |
Additions to the allowance | |
| 29 | | |
| 129 | |
Write-offs of bad debt | |
| (12 | ) | |
| (119 | ) |
Recovery of previously reserved items | |
| (7 | ) | |
| (17 | ) |
Balance, end of period | |
$ | 23 | | |
$ | 13 | |
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in
thousands):
| |
September 30, 2015 | |
December 31, 2014 |
Prepaid expenses | |
$ | 3,483 | | |
$ | 1,846 | |
Refundable tax | |
| 439 | | |
| 492 | |
Deferred commissions | |
| 1,209 | | |
| 871 | |
Gain on unsettled foreign currency forward contracts | |
| – | | |
| 5 | |
Other current assets | |
| 1,746 | | |
| 1,211 | |
Prepaid expenses and other current assets | |
$ | 6,877 | | |
$ | 4,425 | |
Property and Equipment, Net
Property and equipment, net consist of the following (in thousands):
| |
September 30, 2015 | |
December 31, 2014 |
Computer equipment | |
$ | 30,560 | | |
$ | 26,406 | |
Furniture, fixtures, and equipment | |
| 696 | | |
| 716 | |
Leasehold improvements | |
| 2,986 | | |
| 2,447 | |
Total property and equipment(1) | |
| 34,242 | | |
| 29,569 | |
Less accumulated depreciation and amortization(2) | |
| (23,462 | ) | |
| (20,088 | ) |
Property and equipment, net | |
$ | 10,780 | | |
$ | 9,481 | |
(1) |
Includes assets under capital lease of $5.4 million as of September 30, 2015 and December 31, 2014, respectively. |
(2) |
Includes accumulated amortization of $3.7 million and $2.8 million relating to assets under capital lease as of September 30, 2015 and December 31, 2014, respectively. |
Depreciation expense was $1.4 million and $1.1 million for the three
months ended September 30, 2015 and 2014, respectively, and $3.6 million and $2.6 million for the nine months ended September 30,
2015 and 2014, respectively. Included in these amounts were depreciation expenses for assets acquired under capital leases in the
amount of $0.3 million and $0.9 million for the three and nine months ended September 30, 2015, respectively, and $0.3 million
and $0.6 million for the three and nine months ended September 30, 2014, respectively.
Other Assets
Other assets consist of the following (in thousands):
| |
September 30, 2015 | |
December 31, 2014 |
Deferred costs and commissions | |
| 895 | | |
| 674 | |
Facility deposits for operating leases | |
| 891 | | |
| 891 | |
Others | |
| 83 | | |
| 44 | |
Other assets | |
$ | 1,869 | | |
$ | 1,609 | |
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, are
as follows (in thousands):
| |
September 30, 2015 | |
December 31, 2014 |
Foreign currency translation adjustments | |
$ | 1,901 | | |
$ | 1,626 | |
Net unrealized loss on foreign currency contracts designated as cash flow hedges | |
| 517 | | |
| 353 | |
Total accumulated other comprehensive loss | |
$ | 2,418 | | |
$ | 1,979 | |
5. Other Income, Net
Other income, net consists of the following (in thousands):
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Interest expense | |
$ | (27 | ) | |
$ | (184 | ) | |
$ | (101 | ) | |
$ | (454 | ) |
Foreign exchange gain (loss) | |
| 155 | | |
| 98 | | |
| 148 | | |
| (33 | ) |
Gain on foreign currency forward contracts | |
| 8 | | |
| 26 | | |
| 391 | | |
| 638 | |
Convertible preferred stock warrants remeasurement | |
| – | | |
| (1 | ) | |
| – | | |
| (149 | ) |
Other non-operating income, net | |
| 25 | | |
| 21 | | |
| 71 | | |
| 45 | |
Total other income, net | |
$ | 161 | | |
$ | (40 | ) | |
$ | 509 | | |
$ | 47 | |
6. Commitments and Contingencies
Operating Leases: The Company has several
operating leases for its office facilities with various expiration dates through March 2022. Rental expenses from these leases
are recognized on a straight-line basis through the end of the lease. Under the terms of certain leases, the Company is responsible
for certain taxes, insurance, maintenance and management expenses.
Future rental payments under non-cancelable operating leases with initial
terms in excess of one year, as of September 30, 2015, are as follows (in thousands):
Year ending December 31: | |
|
2015 (remaining three months) | |
$ | 666 | |
2016 | |
| 2,735 | |
2017 | |
| 2,201 | |
2018 | |
| 1,984 | |
2019 | |
| 2,043 | |
Thereafter | |
| 4,819 | |
Total minimum payments | |
$ | 14,448 | |
Rent expense during the three months ended September 30, 2015 and 2014,
was $0.8 million and $0.4 million, respectively, and $2.1 million and $1.4 million during the nine months ended September
30, 2015 and 2014, respectively. As of September 30, 2015, the short-term deferred rent liability and long-term liability
was $0.1 million and $0.8 million, respectively. As of December 31, 2014, the short-term deferred rent liability and long-term
liability was $0.1 million and $0.1 million, respectively.
Capital Leases: The Company acquired certain
software licenses and server and network equipment classified as capital leases. The original term of the capital leases unpaid
as of September 30, 2015 ranges from three to four years. The portion of the future payments designated as principal repayment
was classified as a capital lease obligation on the consolidated balance sheets. Future payments under the capital leases, as of
September 30, 2015, are as follows (in thousands):
Year ending December 31: |
|
|
2015 (remaining three months) |
|
$ |
52 |
|
2016 |
|
|
1,086 |
|
2017 |
|
|
398 |
|
Total minimum payments |
|
$ |
1,536 |
|
Interest expense recognized in the three months and nine month ended
September 30, 2015 and 2014, is immaterial in relation to these capital lease arrangements.
Other Commitments: As of September 30,
2015, the Company has several other commitments for telecommunication and data center services and support and maintenance with
various expiration dates through the end of 2018 as follows (in thousands):
Year ending December 31: | |
|
2015 (remaining three months) | |
| 958 | |
2016 | |
| 3,655 | |
2017 | |
| 856 | |
2018 | |
| 57 | |
Total minimum payments | |
$ | 5,526 | |
Contingencies: The Company has engaged Goldman, Sachs &
Co. ("Goldman Sachs") as its exclusive financial advisor with respect to the merger with Envestnet, Inc. Pursuant
to an engagement letter between the Company and Goldman Sachs, the Company has agreed to pay Goldman Sachs a transaction fee
of approximately $7.0 million, all of which is payable upon completion of the merger. Refer to Note 14 to these
consolidated financial statements for further information regarding the merger.
Indemnification
Under the indemnification provisions of its standard sales contracts,
the Company agrees to defend its customers against third-party claims asserting infringement of certain intellectual property rights,
which may include patents, copyrights, trademarks, or trade secrets, and to indemnify its customers for certain losses resulting
from such claims. In addition, the Company also agrees to indemnify its customers against losses, expenses, and liabilities from
damages that may be awarded against them if its applications are found to result in a security breach in certain circumstances.
The exposure to the Company under these indemnification provisions could potentially expose it to losses in excess of the amount
received under the agreement. It is not possible to determine the maximum potential amount under these indemnification obligations
due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement.
To date, there have been no material claims under such indemnification provisions, and no liability related to these indemnification
agreements has been recorded as of September 30, 2015 and December 31, 2014.
Legal Matters
In the ordinary course of business, the Company may be involved in lawsuits,
claims, investigations, and proceedings consisting of intellectual property, commercial, employment, and other matters. Legal fees
and other costs associated with such actions are expensed as incurred. The Company will record a provision for these claims when
it is both probable that a liability has been incurred and the amount of the loss, or a range of the potential loss, can be reasonably
estimated. These provisions are reviewed regularly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice
of legal counsel, and other information or events pertaining to a particular case. Litigation accruals are recorded when and if
it is determined that a loss is both probable and reasonably estimable. Material loss contingencies that are reasonably possible
of occurrence, if any, are subject to disclosures. The Company believes that liabilities associated with any claims, while possible,
are not probable, and therefore has not recorded any accrual for any claims as of September 30, 2015. Further, any possible
range of loss cannot be reasonably estimated at this time.
On December 2, 2014, the Company filed a complaint in the United States
District Court for the District of Delaware alleging that Plaid Technologies Inc. (“Plaid”) has and is continuing
to infringe on seven of the Company’s U.S. patents. The complaint seeks unspecified monetary damages, enhanced damages,
interest, fees, expenses, costs and injunctive relief against Plaid. On January 23, 2015, in lieu of filing an answer to
the complaint, Plaid filed a motion to dismiss, alleging that the Company’s patents do not claim patent eligible subject
matter. The Company filed its answering brief to the motion to dismiss on February 20, 2015. Plaid filed its reply brief
on March 6, 2015. At the outset of the litigation, the judge presiding over the litigation referred certain matters to be handled
by the assigned magistrate judge, including case scheduling, and any motions to dismiss. Under the applicable procedural rules,
the magistrate judge will issue a report and recommendation regarding Plaid’s motion to dismiss. Either party may then
file objections to the magistrate judge’s report and recommendation, and those objections will be reviewed by the judge
presiding over the litigation. The magistrate judge held a hearing on May 4, 2015 to discuss the case schedule and to hear
oral arguments on the motion to dismiss. At the conclusion of the May 4th hearing, the magistrate judge reserved judgement on
the motion to dismiss, and entered a trial date of March 13, 2017. On May 18, 2015, Plaid filed a motion requesting that the Court
stay all discovery while its decision on the motion to dismiss is pending. Discovery proceeded during the pendency of the motion
to stay. On July 20, 2015, the Magistrate Judge issued an opinion denying the motion to stay. As a result, discovery continues
to proceed while the motion to dismiss is pending. On October 19, 2015, the Court held a teleconference with the parties to discuss
the Court’s non-binding mediation process and whether it would assist the parties at the present time. It is the practice
of the Court to consider the possibility of non-binding dispute resolution proceedings in most complex litigations. The Court
did not set a date for non-binding mediation at the present time but scheduled a further teleconference to December 2, 2015 in
which the parties will discuss potential timing of any mediation procedure with the Court. It is too early to predict the outcome
of these legal proceedings or whether an adverse result would have a material adverse impact on the Company’s operations
or financial position.
The Company, each members of the Company’s board of directors (“Board”), Envestnet, Inc.,
a Delaware corporation (“Parent”), and Yale Merger Corp., a Delaware corporation (“Merger Sub”) have been
named as defendants in two putative class actions challenging the merger between Parent and the Company in the Court of Chancery
of the State of Delaware. The suits are captioned Suman Inala v. Yodlee, Inc., et al. (Case No. 11461) (filed September 2, 2015
and amended on October 14, 2015) and Guillaume Wieland-Paquet v. Yodlee, Inc., et al. (Case No. 11611) (filed October 14, 2015).
It is expected that the lawsuits will be formally consolidated. The complaints allege, among other things, that the Company’s
Board breached its fiduciary duties by agreeing to sell the Company through a conflicted process and by failing to ensure that
the Company’s stockholders received adequate and fair value for their shares. The complaints also now allege that the Form
S-4 Registration Statement filed by Parent, which contained the Company’s proxy statement, failed to disclose material information
to the Company’s stockholders. The complaints also allege that the Parent and Merger Sub have aided and abetted these breaches
of fiduciary duties. The existing complaints seek as relief, among other things, an injunction against the merger, rescission
of the merger agreement to the extent it is already implemented, an award of damages and attorneys’ fees. The Company believes
the lawsuits are without merit.
On October 16, 2015, the Plaintiff in the Guillaume Wieland-Paquet
lawsuit filed a motion seeking expedited proceedings in support of an anticipated motion for a preliminary injunction. Defendants
opposed the motion for expedited proceedings, and the Court of Chancery denied Plaintiff’s motion on October 28, 2015.
7. Bank Borrowings and Extinguishment of Debt
As of December 31, 2014, the Company
has repaid all amounts outstanding related to all bank borrowings using proceeds from the initial public offering (“IPO”).
On March 17, 2015, the term of
the Company’s revolving line of credit expired and was not renewed.
8. Net Loss per Share
The Company computes net loss per share of common stock in conformity
with the two-class method required for participating securities. The Company considers all series of the Company’s convertible
preferred stock to be participating securities as the holders of the preferred stock are entitled to receive a noncumulative dividend
on a pari passu basis in the event that a dividend is paid on common stock. The holders of all series of convertible preferred
stock do not have a contractual obligation to share in the losses of the Company. As such, the Company’s net losses for the
three and nine months ended September 30, 2015 and 2014 were not allocated to these participating securities.
Basic net loss per share is computed by dividing total net loss attributable
to common stockholders by the weighted-average common shares outstanding. The weighted-average common shares outstanding are adjusted
for shares subject to repurchase. Diluted net loss per share is computed by dividing the net income (loss) attributable to common
stockholders by the weighted-average number of common shares outstanding including potential dilutive common stock instruments.
In the three and nine months ended September 30, 2015 and 2014, the Company’s potential common stock instruments such as
stock options, RSUs, shares of preferred stock and the preferred stock warrants were not included in the computation of diluted
net loss per share as the effect of including these shares in the calculation would have been anti-dilutive.
The following table presents the calculation of the numerators and denominators
of the basic and diluted net loss per share for periods presented (in thousands, except per share amounts):
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Net loss attributable to common stockholders | |
$ | (3,215 | ) | |
$ | (1,619 | ) | |
$ | (8,802 | ) | |
$ | (2,568 | ) |
Basic shares: | |
| | | |
| | | |
| | | |
| | |
Weighted-average common shares outstanding | |
| 30,505 | | |
| 7,678 | | |
| 29,932 | | |
| 7,572 | |
Less: Weighted-average shares subject to repurchase | |
| – | | |
| – | | |
| – | | |
| – | |
Weighted-average shares used to compute basic and diluted net loss per share | |
| 30,505 | | |
| 7,678 | | |
| 29,932 | | |
| 7,572 | |
Net loss per share attributable to common stockholders | |
$ | (0.11 | ) | |
$ | (0.21 | ) | |
$ | (0.29 | ) | |
$ | (0.34 | ) |
The following potential common shares were excluded from the calculation
of diluted income (loss) per share attributable to common stockholders because their effect would have been anti-dilutive for the
periods presented (in thousands):
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Convertible preferred stock | |
| – | | |
| 14,445 | | |
| – | | |
| 14,445 | |
Stock options | |
| 4,693 | | |
| 5,195 | | |
| 4,693 | | |
| 5,195 | |
RSUs | |
| 1,609 | | |
| 625 | | |
| 1,609 | | |
| 625 | |
Convertible preferred stock warrants | |
| – | | |
| 113 | | |
| – | | |
| 113 | |
| |
| 6,302 | | |
| 20,378 | | |
| 6,302 | | |
| 20,378 | |
9. Stockholders’ Equity
Equity Incentive Plans
The Company’s 2014 Equity Incentive Plan (the “2014 Plan”)
provides for the award of non-qualified stock options, restricted stock, performance shares, and restricted stock units to employees,
non-employee directors and consultants. The 2014 Plan became effective upon the IPO of the Company’s common stock on October
3, 2014. At the time of completion of the IPO, any shares of common stock reserved for issuance and any shares of common stock
which are forfeited, cancelled or terminated, other than by exercise, under the 2009 Plan became available for issuance under the
2014 Plan. The 2009 Plan was canceled and the maximum number of shares to be added to the 2014 Plan from the 2009 Plan was 7,263,193
shares, subject to annual increases under such plan.
Stock options granted under the 2014 Plan vest over the periods determined
by the Board of Directors, generally four years, and expire no more than ten years after the date of grant. In the case of an incentive
stock option granted to an employee, who at the time of grant, owns stock representing more than 10% of the total combined voting
power of all classes of stock, the exercise price shall be no less than 110% of the fair value per share on the date of grant,
and expire five years from the date of grant, and for options granted to any other employee, the per share exercise price shall
be no less than 100% of the fair value per share on the date of grant. Stock options become exercisable at such times and under
such conditions as determined by the board of directors. RSUs, stock appreciation rights and restricted stock awards are granted
under such conditions as determined by the board of directors.
As of September 30, 2015, the Company was authorized to grant up to 1,753,857
shares under the equity incentive plans.
Employee Stock Purchase Plan
On September 18, 2014, the Company’s board of directors and stockholders
adopted the 2014 Employee Stock Purchase Plan (“2014 ESPP”). A total of 500,000 shares of common stock were initially
reserved for future issuance under the 2014 ESPP subject to annual increases under such plan. As of September 30, 2015, no purchase
has been made pursuant to the 2014 ESPP and 792,638 shares remain available for future issuance. There has been no stock-based
compensation expense recorded as of September 30, 2015 related to the ESPP.
Determining the Fair Values of Stock Options
The Company utilizes the Black-Scholes model for valuing its stock options.
The weighted-average grant-date fair value of options granted during the three months ended September 30, 2015 and 2014 was $6.55
and $5.06 per share, respectively, and for the nine months ended September 30, 2015 and 2014 was $5.37 and $4.99 per
share, respectively. The following table presents the weighted-average assumptions used to estimate the fair value of the stock
options granted in the Company’s condensed consolidated financial statements:
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Dividend rate | |
| - | % | |
| - | % | |
| - | % | |
| - | % |
Risk-free interest rate | |
| 1.7 | % | |
| 2.0 | % | |
| 1.7 | % | |
| 2.0 | % |
Remaining contractual term (in years) | |
| 6.1 | | |
| 6.1 | | |
| 6.0 | | |
| 6.0 | |
Expected volatility | |
| 40 | % | |
| 40 | % | |
| 40 | % | |
| 40 | % |
The following table presents the effects of stock-based compensation
on the Company’s condensed consolidated statements of operations during the periods presented (in thousands):
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Cost of revenue—subscription | |
$ | 282 | | |
$ | 249 | | |
$ | 871 | | |
$ | 348 | |
Cost of revenue—professional services and other | |
| 163 | | |
| 142 | | |
| 441 | | |
| 206 | |
Research and development | |
| 581 | | |
| 314 | | |
| 1,452 | | |
| 442 | |
Sales and marketing | |
| 581 | | |
| 391 | | |
| 1,648 | | |
| 563 | |
General and administrative | |
| 1,026 | | |
| 731 | | |
| 2,683 | | |
| 1187 | |
Total stock-based compensation expense | |
$ | 2,633 | | |
$ | 1,827 | | |
$ | 7,095 | | |
$ | 2,746 | |
No current income tax benefit has been recognized relating to stock-based
compensation expense and no tax benefits realized from exercised stock options. No stock-based compensation cost was capitalized
for any of the periods presented.
A summary of stock option activity for the nine months ended September
30, 2015 is as follows (in thousands, except per share amounts and contractual term):
| |
| |
Options Outstanding |
| |
Shares Available for Grant | |
Number of Shares | |
Weighted- Average Exercise Price per Share | |
Weighted- Average Remaining Contractual Term | |
Aggregate Intrinsic Value(1) |
Balance as of December 31, 2014 | |
| 1,416 | | |
| 5,233 | | |
$ | 6.95 | | |
| 6.2 | | |
$ | 27,483 | |
Increase in shares authorized | |
| 1,463 | | |
| - | | |
| | | |
| | | |
| | |
Options granted | |
| (989 | ) | |
| 989 | | |
| 13.13 | | |
| | | |
| | |
RSU granted | |
| (1,233 | ) | |
| - | | |
| | | |
| | | |
| | |
Options exercised | |
| - | | |
| (1,342 | ) | |
| 4.94 | | |
| | | |
| | |
Options forfeited | |
| 187 | | |
| (187 | ) | |
| 10.25 | | |
| | | |
| | |
RSU forfeited | |
| 117 | | |
| - | | |
| | | |
| | | |
| | |
Balance as of September 30, 2015 | |
| 961 | | |
| 4,693 | | |
$ | 8.69 | | |
| 6.6 | | |
$ | 34,934 | |
Vested and expected to vest— September 30, 2015 | |
| | | |
| 4,438 | | |
$ | 8.50 | | |
| 6.5 | | |
$ | 33,892 | |
Vested— September 30, 2015 | |
| | | |
| 2,819 | | |
$ | 6.79 | | |
| 5.3 | | |
$ | 26,342 | |
(1) | | The aggregate intrinsic value is calculated as the difference
between the exercise price of the underlying stock option awards and the assessed fair value of the Company’s common stock
as of September 30, 2015. |
The intrinsic value of options exercised during the three months ended
September 30, 2015 and 2014 was $4.7 million and $0.7 million, respectively, and during the nine months ended September 30, 2015
and 2014 was $12.3 million and $2.4 million, respectively. The fair value of stock options vested during the three months ended
September 30, 2015 and 2014, was $1.1 million and $0.7 million, respectively, and during the nine months ended September
30, 2015 and 2014 was $3.1 million and $2.2 million, respectively. As of September 30, 2015, total unrecognized compensation expense
related to stock options was $7.7 million, and was expected to be recognized over a weighted-average remaining vesting period
of 2.6 years. The Company repurchased common stock from certain employees in connection with the net issuance of shares to
satisfy minimum tax withholding obligations upon the vesting of certain stock awards issued to such employees. Repurchases associated
with tax withholdings were $0.1 million and $1.1 million during the three and nine months ended September 30, 2015, respectively,
and zero dollars during the three and nine months ended September 30, 2014, respectively.
The following table summarizes the activity related to the Company’s
RSUs for the nine months ended September 30, 2015:
| |
Number of RSUs | |
Weighted- Average Fair Value per Share(1) |
| |
(in thousands) | |
|
Balance as of December 31, 2014 | |
| 723 | | |
$ | 12.04 | |
Restricted stock units granted | |
| 1,233 | | |
$ | 13.44 | |
Restricted stock units forfeited | |
| (117 | ) | |
$ | 12.67 | |
Restricted stock units released | |
| (230 | ) | |
$ | 12.15 | |
Balance as of September 30, 2015 | |
| 1,609 | | |
$ | 13.05 | |
(1) | | Represents assessed fair value of RSUs |
The Company recognized stock
compensation expense related to RSUs during the three and nine months ended September 30, 2015 of $1.3 million and $3.8 million,
respectively. The Company did not recognize any stock compensation expense related to RSUs during the three and nine months ended
September 30, 2014 because the completion of the Company’s IPO had not occurred and was not probable of occurrence as of
September 30, 2014. As of September 30, 2015, total unrecognized compensation expense,
net of forfeitures, related to RSUs was $15.0 million, and was expected to be recognized over a weighted-average period vesting
period of 3.0 years.
10. Common Stock Reserved For Future Issuance
As of September 30, 2015 and December 31, 2014, the Company
had 8,056,655 and 7,873,253 common shares reserved for future issuance under the Company’s equity incentive plan.
11. Related-Party Transactions
The Company recorded revenue from a major financial institution, which
is a significant stockholder, totaling $1.9 million and $3.2 million, during the three months ended September 30, 2015
and 2014, respectively, and $5.8 million and $9.1 million, during the nine months ended September 30, 2015 and 2014,
respectively. That financial institution comprised 7% and 20% of total accounts receivable as of September 30, 2015 and December
31, 2014, respectively.
The Company recorded revenue of $0.5 million and $0.4 million, from
other related parties during the three months ended September 30, 2015 and 2014, respectively, and $1.7 million and $0.8 million,
during the nine months ended September 30, 2015 and 2014, respectively. Total accounts receivable from other related parties as
of September 30, 2015 and December 31, 2014, was $0.1 million and $0.1 million, respectively.
12. Income Taxes
The provision for income tax was $0.6 million and $0.5 million for the
three months ended September 30, 2015 and 2014, respectively, and for the nine months ended September 30, 2015 and 2014 was $1.7
million and $1.4 million, respectively. The provision for income taxes consists primarily of foreign income taxes and foreign withholding
taxes.
For the three and nine months ended
September 30, 2015 and 2014, the provision for income taxes differed from the statutory amount primarily due to foreign taxes
currently payable, and because the Company realized no benefit for losses which could not be benefited due to maintaining a full
valuation allowance against the U.S. net deferred tax assets.
The realization of tax benefits of deferred tax assets is dependent upon
future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable.
Based on the available objective evidence, the Company does not believe it is more likely than not that all the net deferred tax
assets will be realizable. Accordingly, the Company has provided a full valuation allowance against the domestic deferred tax assets
as of September 30, 2015 and December 31, 2014. The Company intends to maintain the full valuation allowance until sufficient
positive evidence exists to support a reversal of, or decrease in, the valuation allowance.
13. Information About Geographic Areas
Revenue by geography is based on the billing address of the customer.
The following table sets forth revenue by geographic area (in thousands):
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
United States | |
$ | 24,634 | | |
$ | 19,694 | | |
$ | 67,639 | | |
$ | 55,598 | |
International (1) | |
| 3,933 | | |
| 3,459 | | |
| 11,492 | | |
| 8,622 | |
Total | |
$ | 28,567 | | |
$ | 23,153 | | |
$ | 79,131 | | |
$ | 64,220 | |
(1) | | No foreign country accounted for more than 10% of total
revenue. |
The following table sets forth long-lived assets by geographic area (in
thousands):
| |
September 30, 2015 | |
December 31, 2014 |
United States | |
$ | 8,369 | | |
$ | 6,537 | |
India | |
| 1,753 | | |
| 2,231 | |
Other | |
| 658 | | |
| 713 | |
Total | |
$ | 10,780 | | |
$ | 9,481 | |
14. Business Mergers
On August 10, 2015, the Company entered into an Agreement and Plan of
Merger (the “Merger Agreement”) with Envestnet, Inc., a Delaware corporation (“Parent”), and Yale Merger
Corp., a Delaware corporation (“Merger Sub”). The Merger Agreement provides for the acquisition of the Company by Parent
by means of a merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger
as a wholly owned subsidiary of Parent.
Per the terms of the Merger Agreement, Parent will acquire all of the
shares of the Company in a cash and stock transaction valued at $18.88 per share, or approximately $660 million on a fully-diluted
equity value basis. The consideration consists of $10.78 per share in cash and the number of validly issued, fully paid and non-
assessable shares of common stock, par value $0.005 per share, of Parent (the “Parent Common Stock”) determined by
dividing $8.10 by the volume weighted average price per share of Parent Common Stock for the 10 consecutive trading days ending
on (and including) the second trading day prior to completion of the Merger, subject to adjustment pursuant to the terms and conditions
of the Merger Agreement.
Consummation of the Merger, which is expected to occur in the fourth quarter of 2015 is subject
to customary closing conditions, including adoption of the Merger Agreement by the Company’s shareholders, listing of Parent
Common Stock issuable pursuant to the Merger Agreement on the New York Stock Exchange, absence of any law or order prohibiting
the consummation of the Merger and expiration or termination of the applicable Hart-Scott-Rodino waiting period. The Merger Agreement
contains certain termination provisions and provides that, upon the termination of the Merger Agreement under certain specified
circumstances, the Company will be required to pay the Parent a termination fee of approximately $17.8 million. Refer to Note 6
to these consolidated financial statements for information on the Goldman Sachs transaction fee.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto
of Yodlee, Inc. included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based
upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk
Factors” and elsewhere in this Quarterly Report on Form 10-Q.
Overview
Yodlee is a leading technology and applications platform powering dynamic
innovation for digital financial services in the cloud. We refer to our platform as the Yodlee Financial Cloud. Our vision is to
empower lives with innovative digital financial services. Our customers include financial institutions, Internet services companies
providing innovative financial solutions and third-party developers of financial applications. As of September 30, 2015, more than
950 organizations in over 15 countries use the Yodlee platform to power their consumer-facing digital offerings, and we receive
subscription fees for 21.3 million of these consumers, whom we refer to as our paid users.
We serve two main customer groups: financial institutions, or FI, customers
and Internet services companies providing innovative financial solutions, which we refer to as our Yodlee Interactive, or YI, customers.
Yodlee provides FI customers with access to the Yodlee Financial Cloud (our platform and secure, open application programming interfaces,
or APIs) and financial applications, or FinApps (end-user facing applications powered by our platform and APIs). Our
platform and APIs enable FI customers to receive end user-permissioned transaction data elements that we aggregate and cleanse,
as well as to enable our money movement solutions. The FinApps powered by our platform and APIs can be subscribed to
individually or in combinations that include personal financial management, wealth management, card, payments and small-medium
business, or SMB, solutions. Our YI customers are Internet services companies and third-party developers, who use our
platform to develop new applications and enhance existing solutions. Our YI customers operate in a number of sub-vertical markets,
including wealth management, personal financial management, small business accounting, small business lending and authentication.
These customers use the Yodlee platform to build solutions that leverage our open APIs and access to a large end user base. In
addition to aggregated transaction-level account data elements, we provide YI customers with secure access to account verification,
money movement and risk assessment tools via our APIs. We play a critical role in bringing innovation from Internet services companies
to financial institutions through the Yodlee Financial Cloud. For example, our YI customers use our solutions in diverse applications
such as: providing working capital to small businesses online; personalized financial management, planning and advisory services;
ecommerce payment solutions; and online accounting systems for small businesses. We provide access to our solutions across multiple
channels, including web, tablet and mobile.
Our financial institution customers encompass many of the leading financial
institutions, including 12 of the 20 largest banks in the United States, which hold 82% of the total assets of the top 20 U.S.
banks (based on total assets as of June 30, 2015). These institutions subscribe to the Yodlee platform to power offerings that
we believe improve consumer satisfaction and enhance engagement, while capturing cross-sell and up-sell opportunities. We estimate
that our current network of financial institution customers alone reaches more than 100 million end users, representing a
significant opportunity to potentially grow our paid user base within existing customers. Our customers that are Internet services
companies have an increasingly large and diverse base of users that also provides additional potential growth opportunities.
The Yodlee Financial Cloud delivers a wide variety of FinApps, and also
enables our customers to develop their own applications through our open APIs, that deliver trusted and secure data, money movement
solutions, and other feature functionality. Our FinApps are targeted at the retail financial, wealth management, small
business banking, card and other financial solutions sectors. These FinApps help consumers and small businesses simplify and manage
their finances, review their financial accounts, track their spending, calculate their net worth, and perform a variety of other
activities. Examples of FinApps include our Expense FinApp, which helps consumers track their spending, and a Payroll FinApp from
a third party, which helps small businesses process their payroll.
We provide subscription services on a business-to-business-to-consumer,
or B2B2C, basis to financial services clients, whereby our customers offer Yodlee-based solutions to their customers, whom we refer
to as end users. On a business-to-business, or B2B, basis we deliver the same platform to third-party developers.
We are a big data practitioner offering data analytics solutions and
market research services that enhance the value of our solutions to our customers and provide insights derived from small, scrubbed,
non-identified, and dynamic samples from a massive population of end user-permissioned, non-identified transaction-level data that
we gather and refine. Our platform collects a wide variety of end user data from over 14,000 sources and puts it in a common repository.
Beyond collecting user-permissioned, non-identified transaction data elements, our platform performs a data refining process and
augments the data with additional information from a variety of other sources. We enrich the data with a proprietary twelve-step
process, adding such elements as categorization and merchant identification for bank or credit card account data and investment
holding identification for investment account data. With this enhanced data, we enable our customers to offer better applications
and more personalized solutions to end users.
We believe that our brand leadership, innovative technology and intellectual
property, large customer base, and unique data gathering and enrichment provide us with competitive advantages that have enabled
us to generate strong growth.
Our solutions benefit our customers and their end users in a wide variety
of ways. For both our FI and YI customers, providing Yodlee-powered solutions improves their end user satisfaction and retention,
accelerates speed to market, creates technology savings and enhances their data analytics solutions and market research capabilities.
For our customers’ end users, our solutions provide better access to their financial information and more control over their
finances, leading to more informed and personalized decision making. For our customers who are members of the developer community,
our solutions provide access to critical data and payments solutions, faster speed to market and enhanced distribution.
Our technology infrastructure is designed to provide a highly accessible
and secure multi-tenant cloud-based platform across hundreds of customers and millions of end users. Our solutions use a single
code base for all customers and are globally accessible across multiple digital channels. Our multi-tenancy model uses a common
data model for all customers but isolates data with logical technical and administrative controls and separate encryption keys
for each customer. Our architecture utilizes state-of-the-art technologies to achieve enhanced availability, scalability and security.
We believe a large addressable market and the need for innovative digital
financial services give us the opportunity to grow considerably in the near term. Our growth strategy addresses two key drivers
of our business: number of paid users and revenue per paid user. As we look to grow the number of paid users on our platform, we
intend to focus on increasing penetration within our existing customer base, signing new customers, and expanding internationally.
We also intend to drive additional revenue per paid user by introducing new solutions like data analytics solutions and market
research services and by pursuing revenue-sharing opportunities from premium FinApps.
Revenues were $28.6 million and $23.2 million for the three months ended
September 30, 2015 and 2014, respectively, and $79.1 million and $64.2 million for the nine months ended September 30, 2015 and
2014, respectively. In the three months ended September 30, 2015, revenue increased by 23% to $28.6 million, driven largely
by an increase in subscription revenue, which grew 28% from the three months ended September 30, 2014. In the nine months
ended September 30, 2015, revenue increased by 23% to $79.1 million, driven largely by an increase in subscription revenue,
which grew 27% from the nine months ended September 30, 2014. We generate revenues primarily from subscription fees and professional
service fees. Subscription revenue has been a growing majority of our revenues and accounted for 88% and 85% of our total revenue
for the three and nine months ended September 30, 2015 and 2014, respectively.
Factors Affecting our Future
Performance
We believe that our future success will
be dependent on many factors, including our ability to expand our relationships with existing customers, grow the number of customers
and derive revenue from new offerings such as our data analytics solutions and market research services and premium FinApps. While
these areas present significant opportunity, they also present risks that we must manage to ensure successful results. See “Risk
Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q for more
information on the risks relating to our customers and product offerings.
Growth in Number of Customers Deploying the Yodlee Platform
The continued growth of our business partially depends on our ability
to secure new subscriptions and deployments of the Yodlee platform by new customers. We continue to target additional major FIs
domestically and internationally to increase the number of paid users and our subscription revenue. We also intend to drive growth
with Internet services companies by participating in additional vertical markets and expanding the breadth of applications and
solutions running on the Yodlee platform. Revenue from these types of companies has accounted for a growing proportion of our total
revenue in recent periods and we believe there is a significant opportunity to increase revenue from these companies in the future.
Renewals and Additional Revenue from Current Customers
The continued growth of our business also partially depends on our ability
to maintain our customer relationships, renew subscriptions from our current customers and generate additional paid users and sources
of revenue from existing customers. Our ability to increase adoption among existing customers is particularly important in light
of our land and expand business model, pursuant to which we target customers with initial product offerings and expand the use
cases and relationship over time. For example, an FI customer may initially subscribe to Yodlee data aggregation and later expand
its relationship with us by licensing additional product offerings and FinApps. As our existing customers increase their adoption
and promotion of the functionality of our solutions and deploy FinApps and additional value-added offerings to their end users,
we anticipate that our number of paid users will increase.
Mix and Timing of Subscriptions and Deployments
Sales to large organizations have typically been characterized by longer
sales cycles, significant contract negotiations and less predictability in completing sales. For example, our sales cycle can generally
last one year or more with our largest FI customers, but is variable and difficult to predict and can be much longer or shorter.
Many of our YI customers and data analytics solutions and market research customers have shorter sales cycles of three to six months.
In addition, FI customers and some large YI customers deploy our solutions in six to nine months. In contrast, many other YI customers
can implement our applications and solutions in approximately three months and our data analytics solutions and market research
customers can begin using our services shortly following contract execution. All of these factors impact the timing of revenue
recognition and have resulted in fluctuations in our subscription revenue and overall operating results.
Growth of Data Solutions and Market Research Services
We have commenced deriving revenue by providing data analytics solutions
and market research services. We believe there are significant opportunities to increase our revenue and average revenue per paid
user by providing these services to our existing customers and to new customers for uses such as market analytics, credit and risk
analytics and other use cases. For the nine months ended September 30, 2015, revenue derived from data analytics solutions and
marketing research services was a key factor in the increase of average revenue per paid user. We anticipate that revenue from
data analytics solutions and marketing research service will continue to be an important factor in our future financial results.
Our future growth and profitability will also be affected by our ability to generate higher average revenue per paid user through
revenue-sharing arrangements with partners who develop premium FinApps. For example, our enterprise API, an API set built for FIs
to speed internal innovation, is designed to allow FIs to offer the same types of developer tools and integration capabilities
previously only available to technology focused innovators. This is a product designed to allow the FIs to level the playing field
against the Internet service companies currently disrupting the traditional models.
Operating Efficiencies and Investment
The cloud-based nature of the Yodlee platform provides us with economies
of scale and operating leverage as the number of deployments and paid users grows. In addition, historically, we have enjoyed increasing
operating efficiencies by leveraging our significant presence in India, which provides us with direct access to a large pool of
talented engineers for research and development, customer support and operations. Our gross margins have expanded in recent periods
and we expect that they will continue to expand over the long term to the extent we are able to realize operating efficiencies.
To support our future potential growth, we have made and expect to continue
to make investments in our data center and other infrastructure in connection with enhancing and expanding our operations both
domestically and internationally. For example, we expect to continue to invest in additional data center resources to keep pace
with our potential growth. We believe that our investment in infrastructure will contribute to improve our operating results in
the long-term; however, this investment will require capital expenditures and may impact our profitability in the near-term. In
addition, we have continued to invest in research and development to improve and enhance the Yodlee platform and the breadth of
applications and services running on the platform to meet our customers’ and potential customers’ needs and to develop
new offerings to more effectively realize the value of the transaction-level data that we gather and refine. We also expect to
continue to expand our sales and marketing efforts domestically and increase awareness of our solutions on a global basis and grow
our international operations. We also expect to incur additional general and administrative expenses as a result of both our growth
and the infrastructure required as a public company. Investment in these areas will cause our operating expenses to continue to
increase in absolute dollars in future periods.
Key Metrics
In addition to our results determined in accordance with U.S. generally
accepted accounting principles, or GAAP, we believe the following non-GAAP and other operational measures are useful in evaluating
our operating performance. We regularly review the key metrics set forth below as we evaluate our business.
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
| |
(in thousands) | |
(in thousands) |
Adjusted EBITDA | |
$ | 3,352 | | |
$ | 1,831 | | |
$ | 5,490 | | |
$ | 4,126 | |
| |
As of September 30, |
| |
2015 | |
2014 |
Paid users (in thousands) | |
| 21,325 | | |
| 17,403 | |
Average revenue per paid user | |
$ | 4.64 | | |
$ | 4.60 | |
Adjusted EBITDA
We define adjusted EBITDA as follows: net loss before income from discontinued
operations; provision for (benefit from) income taxes; other (income) expense, net; depreciation and amortization; stock-based
compensation expense; IP patent litigation costs; and merger and acquisition related costs. We believe adjusted EBITDA provides
investors and other users of our financial information consistency and comparability with our past financial performance and facilitates
period-to-period comparisons of operations. We believe adjusted EBITDA is useful in evaluating our operating performance compared
to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary for
different companies for reasons unrelated to overall operating performance. We use adjusted EBITDA in conjunction with traditional
GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and
quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning
our financial performance.
Adjusted EBITDA increased to $3.4 million in the three months ended
September 30, 2015 from $1.8 million in the three months ended September 30, 2014. Adjusted EBITDA increased to $5.5 million
in the nine months ended September 30, 2015 from $4.1 million in the nine months ended September 30, 2014. The increase in adjusted
EBITDA from the three and nine months ended September 30, 2014 to three and nine months ended September 30, 2015 was primarily
due to an increase in subscription revenues in the both periods.
Adjusted EBITDA should not be considered as a substitute for other measures
of financial performance reported in accordance with GAAP. We understand that, although adjusted EBITDA is frequently used by investors
and securities analysts in their evaluations of companies, adjusted EBITDA has limitations as an analytical tool, including: depreciation
and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future;
adjusted EBITDA does not reflect any cash requirements for these replacements; adjusted EBITDA does not reflect changes in, or
cash requirements for, our working capital needs or contractual commitments; adjusted EBITDA does not reflect cash requirements
for income taxes and the cash impact of other income or expense; and other companies may calculate adjusted EBITDA differently
than we do. We compensate for the inherent limitations associated with using adjusted EBITDA through disclosure of these limitations,
presentation of our financial statements in accordance with GAAP and reconciliation of adjusted EBITDA to the most directly comparable
GAAP measure, net loss. The table below provides a reconciliation of net loss to adjusted EBITDA:
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
| |
(in thousands) | |
(in thousands) |
Net loss | |
$ | (3,215 | ) | |
$ | (1,619 | ) | |
$ | (8,802 | ) | |
$ | (2,568 | ) |
Provision for income taxes | |
| 564 | | |
| 532 | | |
| 1,662 | | |
| 1,374 | |
Other income, net | |
| (161 | ) | |
| 40 | | |
| (509 | ) | |
| (47 | ) |
Depreciation and amortization | |
| 1,350 | | |
| 1,051 | | |
| 3,605 | | |
| 2,621 | |
Stock-based compensation | |
| 2,633 | | |
| 1,827 | | |
| 7,095 | | |
| 2,746 | |
Merger and acquisition related costs | |
| 1,882 | | |
| – | | |
| 1,882 | | |
| – | |
IP patent litigation costs | |
| 299 | | |
| – | | |
| 557 | | |
| – | |
Adjusted EBITDA | |
$ | 3,352 | | |
$ | 1,831 | | |
$ | 5,490 | | |
$ | 4,126 | |
Paid Users
A paid user is defined as a user of an application or service provided
to our customer using the Yodlee platform whose status corresponds to a billable activity under the associated customer contract.
We believe that our ability to increase the number of paid users is an indicator of our market penetration, the growth of our business,
and our potential future business opportunities.
Paid users increased to 21.3 million as of September 30, 2015 from 17.4
million as of September 30, 2014, as a result of increases in the number of new customers and penetration within our existing customer
base.
Average Revenue Per Paid User
Average revenue per paid user is defined at any point in time as the
trailing twelve-month subscription revenue divided by the average number of paid users over the same time period. For a given contract,
as the number of paid users increases, our usage fee per paid user generally decreases due to volume-tiered pricing. However, at
the same time, our cost of subscription revenue declines more rapidly on a per user basis, which contributes to an increase in
our gross margins. Our ability to maintain average revenue per paid user during the last year is an indicator of our success in
developing and monetizing expanded uses for the Yodlee platform, including data analytics solutions and market research services.
In order to support average revenue per paid user, we intend to continue to develop additional applications and services, including
data services and premium FinApps.
Average revenue per paid user increased to $4.64 as of September 30,
2015 from $4.60 as of September 30, 2014 due to revenue from new contracts and data analytics solutions and market research services,
which more than offset the decrease in per user usage fees due to volume-tiered pricing.
Components of Results of Operations
Revenue
We derive our revenue primarily from subscription fees and professional
services fees. We sell subscriptions to the Yodlee platform to our FI and YI customers who make our solutions available to their
end users. Professional services include implementation services, upgrade services, development of interfaces requested by customers,
assistance with integration of our services with the customers’ other applications, dedicated support, and advisory services
to customers who choose to develop their own interfaces and applications.
Subscription revenue is driven primarily by the number of customers,
the number of paid users and the renewal of existing subscription contracts. Subscription revenue is recognized ratably over the
contracted term of each subscription agreement, commencing on the date the service is provided to the customer upon satisfaction
of all applicable revenue recognition criteria. As part of the subscription contracts, our customers generally commit to a minimum
level of paid users from which a minimum level of non-refundable subscription revenue is derived. As paid users in excess of the
guaranteed minimum level access the Yodlee platform, the customer is then required to pay additional usage fees calculated based
upon a contracted per-paid-user fee. No refunds or credits are given if fewer paid users access the Yodlee platform than the contracted
minimum level. Usage-based revenue is recognized as earned, provided all applicable revenue recognition criteria have been satisfied.
For subscription agreements, we typically invoice our customers in monthly or annual fixed installments. Amounts that have been
invoiced are initially recorded as deferred revenue and are recognized ratably over the subscription period. Because the invoicing
terms of our customer agreements vary, the annualized value of the orders we enter into with our customers will not be completely
reflected in deferred revenue at any single point in time. Accordingly, we do not believe that change in deferred revenue is an
accurate indicator of future revenues for a given period of time. Customer contracts are generally non-cancellable
for some specified period and, to the extent such contracts are cancelable before expiration of the term, they generally provide
for payment of certain penalties and/or minimums. We expect our subscription revenue to increase as we add new customers, expand
our paid user base and renew existing subscription contracts.
The proportion of our revenue derived from minimum paid user commitments,
together with favorable subscription revenue net retention rates, a measure of our ability to retain our customers through renewals
of subscription agreements and to expand the number of our paid users, have historically assisted us in predicting our near-term
revenues. As usage increases and customers are required to pay additional usage fees calculated on a per-paid-user basis, a more
significant proportion of our revenue over time may be derived from usage by paid users. This usage-based aspect of our subscription
contracts adds some volatility to our revenue because end users’ activities may vary from period to period based on a variety
of factors outside of our control, including personal financial and other circumstances affecting end user activity, seasonality
and decisions by our customers that affect the extent to which they promote our solutions. Our experience with customers’
growth and our awareness of deployment and promotional plans helps us forecast these usage-based revenues.
Professional services are sold either on a fixed-fee or on a time-and-materials
basis. Revenue for time-and-material arrangements is recognized as the services are performed. Revenue for fixed-fee arrangements
is recognized under the proportional performance method of accounting. We expect our professional services and other revenue to
fluctuate based on the number of new customers added and version upgrade work performed in any given period, and the presence of
other companies who are able to implement our services for customers.
Cost of Revenue
Our total cost of revenue consists of cost of subscription revenue and
cost of professional services and other revenue, both of which consist primarily of personnel-related costs for the operations
team or professional services team, respectively, including salaries, benefits and stock-based compensation.
Cost of revenue–subscription also includes the following: data
center costs to host the Yodlee platform and related support and maintenance costs; depreciation of servers and networking equipment;
security operations; payment processing cost; and allocated facilities and other supporting overhead costs. We expect our cost
of subscription revenue to increase in absolute dollars, although it may fluctuate as a percentage of subscription revenue from
period to period, as our subscription revenue increases.
Cost of revenue–professional services and other also includes
the following: cost of consultants engaged in providing professional services to our customers; and allocated facilities and other
supporting overhead costs. When we defer professional services revenue, we defer the related direct labor costs that we consider
recoverable and recognize them in cost of revenue in the same periods as the related professional service revenue is recognized.
We expect our cost of professional services and other revenue to fluctuate in absolute dollars as our professional services and
other revenue fluctuates.
Gross Profit
Gross profit is total revenue less total cost of revenue. Gross margin,
or gross profit expressed as a percentage of total revenue, has been and will continue to be affected by a variety of factors,
including the sales price of our product offerings, costs to deliver our platform, our ability to leverage our existing infrastructure
as we continue to grow and the mix of revenue between subscription and professional services and other. Our subscription services
generally have a higher gross margin than our professional services and other revenue. Gross margin for professional services and
other is impacted by the size of customer deployments, with smaller projects typically having lower gross margins. We expect our
gross margins to fluctuate over time depending on these and other factors.
Operating Expenses
Our operating expenses consist of research and development, sales and
marketing, and general and administrative expense. Personnel costs are the most significant component of operating expenses and
consist primarily of salaries, benefits, employee bonuses, stock-based compensation, and with regard to sales and marketing expense,
sales commissions.
Research and Development. Research and
development expense consists primarily of personnel costs for employees on our engineering and technical teams who are responsible
for increasing the functionality and enhancing the ease of use of the Yodlee platform and the development of new products and services.
Research and development expense also includes the cost of third-party service providers and allocated facilities and other supporting
overhead costs. We expect research and development expense to increase in absolute dollars as we continue to invest in our future
products and services, although our research and development expense may fluctuate as a percentage of total revenue.
Sales and Marketing. Sales and marketing
expense consists primarily of sales commissions and other personnel costs for employees engaged in sales, sales support, business
development and marketing functions. In addition, sales and marketing expense also includes travel-related expenses, marketing
and public relations costs, and allocated facilities and other supporting overhead costs. We expect sales and marketing expense
to increase in absolute dollars as we continue to hire additional personnel and invest in sales initiatives and marketing programs,
although our sales and marketing expense may fluctuate as a percentage of total revenue.
General and Administrative. General and
administrative expense consists primarily of personnel costs, professional services and allocated facilities and other supporting
overhead costs. General and administrative personnel include our chief executive officer, finance and legal organizations. Professional
services expense consists primarily of legal, auditing, accounting and other consulting costs. We expect general and administrative
expense to increase in absolute dollars as we incur additional legal, accounting, investor relations, and other costs associated
with being a public company, although our general and administrative expense may fluctuate as a percentage of total revenue.
Other Income, Net
Other income, net consists primarily of the interest expense associated
with our bank borrowings, foreign exchange gains or loss, gain or loss on foreign currency forward contracts, revaluation impact
of convertible preferred stock warrant liabilities and other non-operating income or expense.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in our
wholly-owned subsidiary in India and other foreign operations. The provision for income taxes related to our foreign operations
is impacted by items such as increases and decreases in uncertain tax positions in our foreign locations, as well as foreign withholding
taxes. These items, and their impact to our effective tax rate, may fluctuate from year to year. Valuation allowances are provided
when necessary to reduce deferred tax assets to amount expected to be realized. Due to uncertainty as to the realization of benefits
from our U.S. federal and state deferred tax assets, including net operating loss carry forwards, research and development and
other tax credits, we have a full valuation allowance against such assets. We expect to maintain this full valuation allowance
in the near term.
Condensed Consolidated Results of Operations
The following table summarizes our condensed consolidated results of
operations for the three and nine months ended September 30, 2015 and 2014. Our historical results are not necessarily indicative
of the results that may be expected in the future.
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
| |
(in thousands) | |
(in thousands) |
Condensed Consolidated Statements of Operations Data: | |
| |
| |
| |
|
Revenue: | |
| | | |
| | | |
| | | |
| | |
Subscription | |
$ | 25,262 | | |
$ | 19,787 | | |
$ | 69,400 | | |
$ | 54,690 | |
Professional services and other | |
| 3,305 | | |
| 3,366 | | |
| 9,731 | | |
| 9,530 | |
Total revenue | |
| 28,567 | | |
| 23,153 | | |
| 79,131 | | |
| 64,220 | |
Cost of revenue: | |
| | | |
| | | |
| | | |
| | |
Subscription | |
| 7,813 | | |
| 6,728 | | |
| 22,514 | | |
| 18,127 | |
Professional services and other | |
| 2,200 | | |
| 2,263 | | |
| 6,870 | | |
| 6,655 | |
Total cost of revenue | |
| 10,013 | | |
| 8,991 | | |
| 29,384 | | |
| 24,782 | |
Gross profit | |
| 18,554 | | |
| 14,162 | | |
| 49,747 | | |
| 39,438 | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 7,357 | | |
| 6,225 | | |
| 21,146 | | |
| 16,485 | |
Sales and marketing | |
| 7,670 | | |
| 5,966 | | |
| 21,876 | | |
| 15,657 | |
General and administrative | |
| 6,339 | | |
| 3,018 | | |
| 14,374 | | |
| 8,537 | |
Total operating expenses | |
| 21,366 | | |
| 15,209 | | |
| 57,396 | | |
| 40,679 | |
Operating income (loss) | |
| (2,812 | ) | |
| (1,047 | ) | |
| (7,649 | ) | |
| (1,241 | ) |
Other income, net | |
| 161 | | |
| (40 | ) | |
| 509 | | |
| 47 | |
Income (loss) before provision for income taxes | |
| (2,651 | ) | |
| (1,087 | ) | |
| (7,140 | ) | |
| (1,194 | ) |
Provision for income taxes | |
| 564 | | |
| 532 | | |
| 1,662 | | |
| 1,374 | |
Net loss | |
$ | (3,215 | ) | |
$ | (1,619 | ) | |
$ | (8,802 | ) | |
$ | (2,568 | ) |
The following tables summarize our condensed consolidated results of
operations as a percentage of total revenue for the three and nine months ended September 30, 2015 and 2014:
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
Revenue: | |
| | | |
| | | |
| | | |
| | |
Subscription | |
| 88 | % | |
| 85 | % | |
| 88 | % | |
| 85 | % |
Professional services and other | |
| 12 | | |
| 15 | | |
| 12 | | |
| 15 | |
Total revenue | |
| 100 | | |
| 100 | | |
| 100 | | |
| 100 | |
Cost of revenue: | |
| | | |
| | | |
| | | |
| | |
Subscription | |
| 27 | | |
| 29 | | |
| 28 | | |
| 28 | |
Professional services and other | |
| 8 | | |
| 10 | | |
| 9 | | |
| 10 | |
Total cost of revenue | |
| 35 | | |
| 39 | | |
| 37 | | |
| 38 | |
Gross profit | |
| 65 | | |
| 61 | | |
| 63 | | |
| 62 | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 26 | | |
| 27 | | |
| 27 | | |
| 26 | |
Sales and marketing | |
| 27 | | |
| 26 | | |
| 28 | | |
| 25 | |
General and administrative | |
| 22 | | |
| 13 | | |
| 18 | | |
| 13 | |
Total operating expenses | |
| 75 | | |
| 66 | | |
| 73 | | |
| 64 | |
Operating income (loss) | |
| (10 | ) | |
| (5 | ) | |
| (10 | ) | |
| (2 | ) |
Other income, net | |
| 1 | | |
| 0 | | |
| 1 | | |
| 0 | |
Income (loss) before provision for income taxes | |
| (9 | ) | |
| (5 | ) | |
| (9 | ) | |
| (2 | ) |
Provision for income taxes | |
| 2 | | |
| 2 | | |
| 2 | | |
| 2 | |
Net loss | |
| (11 | )% | |
| (7 | )% | |
| (11 | )% | |
| (4 | )% |
Comparison of the Three and Nine Months Ended September 30, 2015 and
2014
Revenue
| |
Three Months Ended September 30, | |
| |
Nine Months Ended September 30, | |
|
| |
2015 | |
2014 | |
% Change | |
2015 | |
2014 | |
% Change |
| |
(in thousands) | |
| |
(in thousands) | |
|
Revenue: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Subscription | |
$ | 25,262 | | |
$ | 19,787 | | |
| 28 | % | |
$ | 69,400 | | |
$ | 54,690 | | |
| 27 | % |
Professional services and other | |
| 3,305 | | |
| 3,366 | | |
| (2 | )% | |
| 9,731 | | |
| 9,530 | | |
| 2 | % |
Total revenue | |
$ | 28,567 | | |
$ | 23,153 | | |
| 23 | % | |
$ | 79,131 | | |
$ | 64,220 | | |
| 23 | % |
Total revenue increased $5.4 million, or 23%, for the three months
ended September 30, 2015, compared to the same period in 2014.
The increase in subscription revenue of $5.5 million, or 28%, was due
primarily to an increase in our paid users and average revenue per paid user. Paid users increased to 21.3 million from 17.4 million
as of September 30, 2015 and 2014, respectively, while average revenue per paid user increased slightly to $4.64 from $4.60 for
the three months ended September 30, 2015 and 2014, respectively, as a result of increased revenue from data solutions and marketing
research services. Professional services and other revenue remained stable in the three months ended September 30, 2015, compared
to the same period in 2014.
Total revenue increased $14.9 million, or 23%, for the nine months
ended September 30, 2015, compared to the same period in 2014.
The increase in subscription revenue of $14.7 million, or 27%, was due
primarily to an increase in our paid users and average revenue per paid user. Paid users increased to 21.3 million from 17.4 million
as of September 30, 2015 and 2014, respectively. Average revenue per paid user increased slightly to $4.64 from $4.60 for the nine
months ended September 30, 2015 and 2014, respectively, as a result of increased revenue from data solutions and marketing research
services. The increase in professional services and other revenue of $0.2 million, or 2%, was due primarily to increased professional
services revenue from data solutions.
Cost of Revenue, Gross Profit and Gross Margin
| |
Three Months Ended June 30, | |
| |
Nine Months Ended June 30, | |
|
| |
2015 | |
2014 | |
| |
2015 | |
2014 | |
|
| |
Amount | |
Gross Margin | |
Amount | |
Gross Margin | |
% Change | |
Amount | |
Gross Margin | |
Amount | |
Gross Margin | |
% Change |
| |
(dollars in thousands) | |
(dollars in thousands) |
Cost of revenue: | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Subscription | |
$ | 7,813 | | |
| | | |
$ | 6,728 | | |
| | | |
| 16 | % | |
$ | 22,514 | | |
| | | |
$ | 18,127 | | |
| | | |
| 24 | % |
Professional services and other | |
| 2,200 | | |
| | | |
| 2,263 | | |
| | | |
| (3 | )% | |
| 6,870 | | |
| | | |
| 6,655 | | |
| | | |
| 3 | % |
Total cost of revenue | |
$ | 10,013 | | |
| | | |
$ | 8,991 | | |
| | | |
| 11 | % | |
$ | 29,384 | | |
| | | |
$ | 24,782 | | |
| | | |
| 19 | % |
Gross profit: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Subscription | |
$ | 17,449 | | |
| 69 | % | |
$ | 13,059 | | |
| 66 | % | |
| 3 | % | |
$ | 46,886 | | |
| 68 | % | |
$ | 36,563 | | |
| 67 | % | |
| 1 | % |
Professional services and other | |
| 1,105 | | |
| 33 | % | |
| 1,103 | | |
| 33 | % | |
| 0 | % | |
| 2,861 | | |
| 29 | % | |
| 2,875 | | |
| 30 | % | |
| (1 | )% |
Total gross profit | |
$ | 18,554 | | |
| 65 | % | |
$ | 14,162 | | |
| 61 | % | |
| 4 | % | |
$ | 49,747 | | |
| 63 | % | |
$ | 39,438 | | |
| 61 | % | |
| 2 | % |
Total cost of revenue increased by $1.0 million, or 11%, total
gross profit increased by $4.4 million, and gross margin increased by 4%, in the three months ended September 30, 2015 compared
to the same period in 2014.
Cost of revenue from subscription fees
increased by $1.1 million, or 16%, in the three months ended September 30, 2015 compared to the same period in 2014. This increase
was primarily due to a $0.5 million increase in personnel costs, including stock-based compensation, related to increased headcount
to support the business growth, a $0.3 million increase in depreciation expense related to software and computer equipment, and
a $0.2 million increase in data center and other hosting related costs to support the increase in subscription revenue.
Gross profit from subscription increased by $4.4 million, and gross margin increased by 3% due primarily
to economies of scale achieved as a result of higher revenue during the period.
Cost of revenue from professional services and other decreased by $0.1 million,
or 3%, in the three months ended September 30, 2015 compared to the same period in 2014. This decrease was primarily due to timing
of customer deployments and increased investment in services capacity to support our overall revenue growth. Gross profit and gross
margin from professional services and other remained consistent.
Total cost of revenue increased by $4.6 million, or 19%, total gross
profit increased by $10.3 million, and gross margin increased by 2%, in the nine months ended September 30, 2015 compared
to the same period in 2014.
Cost of revenue from subscription fees increased by $4.4 million,
or 24%, in the nine months ended September 30, 2015 compared to the same period in 2014. This increase was primarily due to a $2.0
million increase in personnel costs, including stock-based compensation, related to increased headcount to support the business
growth, a $0.9 million increase in data center and other hosting related costs to support the increase in subscription revenue,
a $0.8 million increase in depreciation expense related to software and computer equipment, a $0.3 million increase in payment
processing costs to support the increase in revenue for our account opening product, and a $0.2 million severance payment to terminated
employees. Gross profit from subscription increased by $10.3 million, and gross margin remained consistent primarily due to economies
of scale achieved as a result of higher revenue during the period.
Cost of revenue from professional services and other increased by $0.2
million, or 3%, in the nine months ended September 30, 2015 compared to the same period in 2014. This increase was primarily due
to increases in personnel costs, including stock-based compensation, related to increased headcount to support the business growth.
Gross profit and gross margin from professional services and other remained consistent.
Operating Expenses
Research and development
| |
Three Months Ended September 30, | |
| |
Nine Months Ended September 30, | |
|
| |
2015 | |
2014 | |
% Change | |
2015 | |
2014 | |
% Change |
| |
(dollars in thousands) | |
| |
(dollars in thousands) | |
|
Research and development | |
$ | 7,357 | | |
$ | 6,225 | | |
| 18 | % | |
$ | 21,146 | | |
$ | 16,485 | | |
| 28 | % |
Percentage of net revenue | |
| 26 | % | |
| 27 | % | |
| | | |
| 27 | % | |
| 26 | % | |
| | |
Research and development expense increased by $1.1 million, or
18%, for the three months ended September 30, 2015 compared to the same period in 2014. The increase was primarily due to a $1.2
million increase in personnel costs, including stock-based compensation, related to increased headcount to support the business
growth and a $0.2 million increase in hosting related costs related to product development. The increase was partially offset by
a decrease in consulting service expense of $0.3 million due to reduced use of contractors and consultants.
Research and development expense increased by $4.7 million, or 28%,
for the nine months ended September 30, 2015 compared to the same period in 2014. The increase was primarily due to a $4.7 million
increase in personnel costs, including stock-based compensation, related to increased headcount to support the business growth
and a $0.5 million increase in hosting related costs related to product development. The increase was partially offset by a decrease
in consulting service expense of $0.8 million due to reduced use of contractors and consultants.
Sales and marketing
| |
Three Months Ended September 30, | |
| |
Nine Months Ended September 30, | |
|
| |
2015 | |
2014 | |
% Change | |
2015 | |
2014 | |
% Change |
| |
(dollars in thousands) | |
| |
(dollars in thousands) | |
|
Sales and marketing | |
$ | 7,670 | | |
$ | 5,966 | | |
| 29 | % | |
$ | 21,876 | | |
$ | 15,657 | | |
| 40 | % |
Percentage of net revenue | |
| 27 | % | |
| 26 | % | |
| | | |
| 28 | % | |
| 24 | % | |
| | |
Sales and marketing expense increased by $1.7 million, or 29%, for the
three months ended September 30, 2015 compared to the same period in 2014. The increase was primarily due to a $1.5 million
increase in personnel costs, including stock-based compensation, related to increased headcount to support the business growth
and a $0.2 million increase in consulting service expense.
Sales and marketing expense increased by $6.2 million, or 40%,
for the nine months ended September 30, 2015 compared to the same period in 2014. The increase was primarily due to a $4.7 million
increase in personnel costs, including stock-based compensation, related to increased headcount to support the business growth,
a $0.6 million increase in consulting services, a $0.3 million increase in expense related to trade shows and conventions, a $0.2
million increase in expenses for public relations and investor relations, and a $0.1 million severance payment to terminated employees.
General and Administrative
| |
Three Months Ended September 30, | |
| |
Nine Months Ended September 30, | |
|
| |
2015 | |
2014 | |
% Change | |
2015 | |
2014 | |
% Change |
| |
(dollars in thousands) | |
| |
(dollars in thousands) | |
|
General and administrative | |
$ | 6,339 | | |
$ | 3,018 | | |
| 110 | % | |
$ | 14,374 | | |
$ | 8,537 | | |
| 68 | % |
Percentage of net revenue | |
| 22 | % | |
| 13 | % | |
| | | |
| 18 | % | |
| 13 | % | |
| | |
General and administrative expenses increased by $3.3 million, or 110%,
for the three months ended September 30, 2015 compared to the same period in 2014. The increase was primarily due to $1.9 million
of merger and acquisition related costs, a $0.7 million increase in personnel costs, including stock-based compensation, related
to increased headcount to support the business growth, and a $0.3 million increase in legal fees related to the Plaid litigation.
For additional information concerning the lawsuit, see Part II, Item 1, “Legal Proceedings” in this Quarterly Report
on Form 10-Q.
General and administrative expenses increased by $5.8 million, or 68%,
for the nine months ended September 30, 2015 compared to the same period in 2014. The increase was primarily due to a $2.5 million
increase in personnel costs, including stock-based compensation, related to increased headcount to support the business growth,
$1.9 million of merger and acquisition related costs, a $0.6 million increase in legal fees related to the Plaid litigation, and
a $0.2 million increase in franchise taxes. For additional information concerning the lawsuit, see Part II, Item 1, “Legal
Proceedings” in this Quarterly Report on Form 10-Q.
Other Income, Net
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
| |
(in thousands) | |
(in thousands) |
Other income, net | |
$ | 161 | | |
$ | (40 | ) | |
$ | 509 | | |
$ | 47 | |
Other income, net, increased by $0.2 million and $0.5 million for the
three and nine months ended September 30, 2015, respectively, compared to the same period in 2014. The increase was primarily due
to expenses in the three and nine months ended September 30, 2014, which did not recur in the three and nine months ended September
30, 2015. These expenses were primarily related to the remeasurement of convertible preferred stock warrants, which were converted
immediately prior to our IPO on October 3, 2014 as well as interest expense recorded on our debt, which was fully repaid in October
2014.
Provision for Income Taxes
Provision for income taxes primarily consists of income taxes on our
wholly-owned subsidiary in India and other foreign operations.
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
| |
(dollars in thousands) | |
(dollars in thousands) |
Provision for income taxes | |
$ | 564 | | |
$ | 532 | | |
$ | 1,662 | | |
$ | 1,374 | |
Effective tax rate | |
| (21 | )% | |
| (49 | )% | |
| (23 | )% | |
| (115 | )% |
Provision for income taxes increased by $32,000 and $0.3 million for
the three and nine months ended September 30, 2015, compared to the same period in 2014, respectively. The increase was primarily
due to increased income taxes in our India subsidiary and foreign withholding taxes.
Liquidity and Capital Resources
As of September 30, 2015, we had
cash and cash equivalents of $73.1 million, all of which was held in the United States. We anticipate that the amount of our
cash and cash equivalents held in India may increase in the future as funds are remitted to our Indian subsidiary for services
performed under our intercompany agreements.
Our cash and cash equivalents are comprised primarily of deposits with
commercial banks in checking, interest-bearing and money market accounts. To date, we have satisfied our capital and liquidity
needs through cash collections from our customers, private placements of convertible preferred stock, bank borrowings and proceeds
from the issuance of common stock. We have incurred significant losses in the past as we continued to expand our business. Our
cash flow from operating activities will continue to be affected principally by the extent to which our revenue exceeds or does
not exceed any increase in spending on personnel to support the growth of our business. Our largest source of operating cash flow
is cash collections from our customers.
We believe that our existing cash and cash equivalents and cash flow
from operations will be sufficient to meet our working capital needs and planned capital expenditures for at least the next 12
months. From time to time, we may explore additional financing sources which could include equity, equity-linked and debt financing
arrangements. We cannot assure you that any additional financing will be available to us on acceptable terms or at all.
Cash Flows
The following table summarizes our cash flows for the periods presented
(in thousands):
| |
Nine Months Ended September 30, |
| |
2015 | |
2014 |
| |
(in thousands) |
Consolidated Statements of Cash Flows: | |
| |
|
Net cash used in operating activities | |
$ | (618 | ) | |
$ | 558 | |
Net cash used in investing activities | |
| (4,380 | ) | |
| (4,003 | ) |
Net cash provided by financing activities | |
| 4,573 | | |
| 2,093 | |
Net decrease in cash and cash equivalents | |
$ | (425 | ) | |
$ | (1,352 | ) |
Operating Activities
Our primary source of cash from operating activities has been from cash
collections from our customers. We expect cash inflows from operating activities to be affected by the level of sales and timing
of collections. Our primary uses of cash from operating activities have been for personnel costs. Our cash flow from operations
will continue to be affected principally by the extent to which we grow our revenue and increase our headcount in order to grow
our business.
Cash used in operating activities in the nine months ended September
30, 2015 of $0.6 million was driven by a net loss of $8.8 million as adjusted for the exclusion of non-cash expenses
of $10.7 million and changes in our working capital of $2.5 million. Non-cash charges consist primarily of depreciation
and amortization of our property and equipment and stock-based compensation for stock options. The changes in our working capital
were due primarily to an increase in accounts receivable, prepaid expenses, and accrued liabilities of $3.1 million, $3.0 million,
and $2.5 million, respectively, offset by a decrease in accrued compensation of $0.7 million.
Cash used in operating activities in the nine months ended September
30, 2014 of $0.6 million was driven by a net loss of $2.6 million as adjusted for the exclusion of non-cash expenses of $5.5 million
and changes in our working capital of $2.4 million. Non-cash charges consist primarily of depreciation and amortization of our
property and equipment and stock-based compensation for stock options. The changes in our working capital were due primarily to
an increase in accounts receivable of $1.5 million and prepaid expenses of $2.2 million.
Investing Activities
Our investing activities consist of capital expenditures to purchase
property and equipment, particularly purchases of servers, networking equipment and software licenses. We expect to continue investing
in capital expenditures to support continued growth of our business.
We used $4.4 million and $4.0 million for purchases of property
and equipment in the nine months ended September 30, 2015 and 2014, respectively.
Financing Activities
Our financing activities have consisted primarily of bank borrowings,
net proceeds from the issuance of our common stock in our initial public offering and upon
the exercise of stock options, and issuance of convertible preferred stock.
In the nine months ended September 30, 2015, cash provided by financing
activities was $4.6 million, which consisted primarily of $6.6 million of net proceeds from the issuance of shares of our common
stock upon exercises of stock options offset by $1.1 million of tax payments related to stock-based award activities and $0.9 million
of capital lease payments.
In the nine months ended September 30, 2014, cash provided by financing
activities was $2.1 million, which consisted primarily of $3.2 million of net bank borrowings, and $1.2 million of net proceeds
from the issuance of shares of our common stock upon exercise of stock options offset by $0.7 million of capital lease payments,
$1.2 million of deferred offering costs, and $0.5 million repurchase of common stock.
Backlog
We sell subscriptions to our solutions through contracts that are generally
one to three years in length, although terms can extend to as long as five years. Our subscription agreements with our customers
generally contain scheduled minimum subscription fees, and usage-based fees which depend on the extent their customers or end users
use our platform. We consider the unpaid contractual minimum payments under our subscription agreements to be our backlog. Due
to the inherent volatility of backlog measured using contractual minimums, and the fact that contractual minimums are becoming
increasingly less important to our business, we do not utilize backlog as a key management metric internally and we do not believe
that it is a meaningful measurement of our future revenues.
We expect that the amount of backlog relative to the total value of
our subscription agreements will change from year to year for several reasons, including the timing of contract renewals, the proportion
of total subscription revenue represented by contractual minimum payments and the average non-cancellable terms of our subscription
agreements. The change in backlog that results from these events may not be an indicator of the likelihood of renewal or expected
future revenues.
We also expect that as our customer base continues to mature and customer
deployments scale, renewals over time will increasingly have fewer contractual minimum fees because such fees are intended to decrease
the timing risk associated with initial deployment commitments.
In addition, because revenue for any period is a function of revenue
recognized from deferred revenue under contracts in existence at the beginning of the period, as well as contracts that are renewed
and new customer contracts that are entered into during the period, backlog at the beginning of any period is not necessarily indicative
of future performance.
Off-Balance Sheet Arrangements
During the three and nine months ended September 30, 2015 and 2014,
we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special
purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements.
Contractual Obligations
During the nine months ended September 30, 2015, there have been no material changes
outside the ordinary course of our business in the contractual obligations disclosed in our Annual Report on Form 10-K for the
year ended December 31, 2014. Please see Note 6 of Notes to Consolidated Financial Statements, included in Part I, Item 1,
“Financial Statements” in this Quarterly Report on Form 10-Q for additional disclosures related to capital lease obligations,
operating lease obligations, purchase obligations, and merger-related obligations.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires
us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and
related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Changes in these estimates and assumptions
or conditions could significantly affect our financial condition and results of operations.
During the nine months ended September 30, 2015, there were no significant
changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the year ended December
31, 2014. Please see Note 2 of Notes to Consolidated Financial Statements, included in Item 8 of our Annual Report on Form
10-K for the year ended December 31, 2014, for a more complete discussion of our critical accounting policies and estimates.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss to future earnings, values or future
cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument might change
as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We do not use
derivative financial instruments for speculative, hedging or trading purposes, other than as described below. Our market risk exposure
is primarily a result of fluctuations in foreign currency exchange rates as described below.
Interest Rate Risk
As of September 30, 2015, we had no investments other than cash and
cash equivalents, held by a large, United States commercial bank, and therefore we were not exposed to material interest rate risk.
Inflation Risk
We do not believe that inflation has had a material effect on our business,
financial condition, or results of operations. We continue to monitor the impact of inflation in order to minimize its effects
through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary
pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could
harm our business, financial condition, and results of operations.
Foreign Currency Exchange Risk
We have costs denominated in foreign currencies, primarily the Indian
Rupee. This exposes us to the risk of fluctuations in foreign currency exchange rates. Accordingly, changes in exchange rates,
and in particular a weakening of the U.S. dollar, would negatively affect our expenses and other operating results as expressed
in U.S. dollars. We manage our exposure to fluctuations in the Indian Rupee by entering into forward contracts to cover a portion
of our projected expenditures paid in local currency. These contracts generally have a term of less than 12 months.
The notional amount of our forward contracts was $17.8 million and $12.9
million at September 30, 2015 and December 31, 2014, respectively.
A sensitivity analysis performed on our hedging portfolio indicated
that a hypothetical 10% appreciation of the U.S. dollar from its value at September 30, 2015 and December 31, 2014 would decrease
the fair value of our foreign currency contracts by $1.6 million and $1.5 million, respectively. A hypothetical 10% depreciation
of the U.S. dollar from its value at September 30, 2015 and December 31, 2014 would increase the fair value of our foreign currency
contracts by $2.0 million and $1.8 million, respectively.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,
as of the end of the period covered by this report (the “Evaluation Date”).
In designing and evaluating our disclosure controls and procedures, management
recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact
that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible
controls and procedures relative to their costs.
Based on management’s evaluation, our principal executive officers
and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide
assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in U.S. Securities and Exchange Commission
rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer
and chief financial officer to allow timely decisions regarding required disclosures.
(b) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting
that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
We may, from time to time, be subject to legal proceedings and claims
arising from the normal course of business activities, and an unfavorable resolution of any of these matters could materially affect
our future business, results of operations, financial condition or cash flows.
On December 2, 2014, we filed a complaint in the United States District
Court for the District of Delaware alleging that Plaid Technologies Inc. (“Plaid”) has and is continuing to infringe
on seven of our U.S. patents. The complaint seeks unspecified monetary damages, enhanced damages, interest, fees, expenses,
costs and injunctive relief against Plaid. On January 23, 2015, in lieu of filing an answer to the complaint, Plaid filed
a motion to dismiss, alleging that our patents do not claim patent eligible subject matter. We filed our answering brief
to the motion to dismiss on February 20, 2015. Plaid filed its reply brief on March 6, 2015. At the outset of the litigation,
the judge presiding over the litigation referred certain matters to be handled by the assigned magistrate judge, including case
scheduling, and any motions to dismiss. Under the applicable procedural rules, the magistrate judge will issue a report and recommendation
regarding Plaid’s motion to dismiss. Either party may then file objections to the magistrate judge’s report and
recommendation, and those objections will be reviewed by the judge presiding over the litigation. The magistrate judge
held a hearing on May 4, 2015 to discuss the case schedule and to hear oral arguments on the motion to dismiss. At the conclusion
of the May 4th hearing, the magistrate judge reserved judgement on the motion to dismiss, and entered a trial date of March 13,
2017. On May 18, 2015, Plaid filed a motion requesting that the Court stay all discovery while its decision on the motion to dismiss
is pending. Discovery proceeded during the pendency of the motion to stay. On July 20, 2015, the Magistrate Judge issued an opinion
denying the motion to stay. As a result, discovery continues to proceed while the motion to dismiss is pending. On October 19,
2015, the Court held a teleconference with the parties to discuss the Court’s non-binding mediation process and whether
it would assist the parties at the present time. It is the practice of the Court to consider the possibility of non-binding dispute
resolution proceedings in most complex litigations. The Court did not set a date for non-binding mediation at the present time
but scheduled a further teleconference to December 2, 2015 in which the parties will discuss potential timing of any mediation
procedure with the Court. It is too early to predict the outcome of these legal proceedings or whether an adverse result would
have a material adverse impact on our operations or financial position.
We, each members of our board of directors, Envestnet,
Inc., a Delaware corporation (“Envestnet”), and Yale Merger Corp., a Delaware corporation (“Merger Sub”)
have been named as defendants in two putative class actions challenging the merger between us and Envestnet in the Court of Chancery
of the State of Delaware. The suits are captioned Suman Inala v. Yodlee, Inc., et al. (Case No. 11461) (filed September 2, 2015
and amended on October 14, 2015) and Guillaume Wieland-Paquet v. Yodlee, Inc., et al. (Case No. 11611) (filed October 14, 2015).
It is expected that the lawsuits will be formally consolidated. The complaints allege, among other things, that our board of directors
breached its fiduciary duties by agreeing to sell us through a conflicted process and by failing to ensure that our stockholders
received adequate and fair value for their shares. The complaints also now allege that the Form S-4 Registration Statement filed
by Envestnet, which contained our proxy statement, failed to disclose material information to our stockholders. The complaints
also allege that the Envestnet and Merger Sub have aided and abetted these breaches of fiduciary duties. The existing complaints
seek as relief, among other things, an injunction against the merger, rescission of the merger agreement to the extent it is already
implemented, an award of damages and attorneys’ fees. We believe the lawsuits are without merit.
On October 16, 2015, the Plaintiff in the Guillaume Wieland-Paquet
lawsuit filed a motion seeking expedited proceedings in support of an anticipated motion for a preliminary injunction. Defendants
opposed the motion for expedited proceedings, and the Court of Chancery denied Plaintiff’s motion on October 28, 2015.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described below, together with all of the other information in this Form
10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
unaudited condensed consolidated financial statements and related notes, before making a decision to invest in our common stock.
If any of the risks actually occur, our business, financial condition, operating results and prospects could be materially and
adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Risks Relating to the Merger
The merger agreement may be terminated in accordance with its terms and the merger
may not be completed.
The merger agreement is subject to a number of conditions that must
be fulfilled in order to complete the merger. Those conditions include: the approval of the merger agreement by our stockholders,
the expiration or termination of any waiting period (and extensions thereof) applicable to the transactions contemplated by the
merger agreement under the HSR Act, the accuracy of representations and warranties under the merger agreement (subject to the materiality
standards set forth in the merger agreement) and Envestnet's and our performance of their respective obligations under the merger
agreement in all material respects. These conditions to the closing of the merger may not be fulfilled in a timely manner or at
all, and, accordingly, the merger may be delayed or may not be completed.
In addition, if the merger is not completed by February 15, 2016, either
Envestnet or we may choose not to proceed with the merger, and the parties can mutually decide to terminate the merger agreement
at any time, before or after stockholder approval. In addition, Envestnet and we may elect to terminate the merger agreement in
certain other circumstances. If the merger agreement is terminated under certain circumstances, we may be required to pay a termination
fee of $17.8 million to Envestnet.
Failure to complete the merger could negatively impact the price our common stock,
as well as our future business and financial results.
The merger agreement contains a number of conditions that must be satisfied
or waived prior to the completion of the merger. There can be no assurance that all of the conditions to the merger will be so
satisfied or waived. If the conditions to the merger are not satisfied or waived, we and Envestnet will be unable to complete the
merger.
If the merger is not completed for any reason, including the failure
to receive the required adoption of the merger agreement by our stockholders, Envestnet's and our respective businesses and financial
results may be adversely affected as follows:
- we and Envestnet may experience negative reactions from the financial markets, including
negative impacts on the market price of Envestnet common stock and our common stock;
- the manner in which customers and other third parties perceive us and Envestnet may be negatively
impacted, which in turn could affect Envestnet's and our ability to retain or compete for new business;
- we and Envestnet may experience negative reactions from employees; and
- we and Envestnet will have expended time and resources that could otherwise have been spent
on Envestnet's and our existing businesses and the pursuit of other opportunities that could have been beneficial to each company,
and Envestnet's and our ongoing business and financial results may be adversely affected.
In addition to the above risks, if the merger agreement is terminated
and either party's Board of Directors seeks an alternative transaction, such party's stockholders cannot be certain that such party
will be able to find a party willing to engage in a transaction on more attractive terms than the merger. If the merger agreement
is terminated under certain circumstances, we may be required to pay a termination fee of $17.8 million to Envestnet. See the section
entitled "The Merger Agreement—Expenses and Termination Fees; Liability for Breach" in the Registration Statement.
We will be subject to business uncertainties while the merger is pending, which could
adversely affect our business.
Uncertainty about the effect of the merger on employees and customers
may have an adverse effect on us, and, consequently, Envestnet. These uncertainties may impair our ability to attract, retain and
motivate key personnel until the merger is completed and for a period of time thereafter, and could cause customers and others
that deal with us to seek to change their existing business relationships with us. Employee retention by us may be particularly
challenging during the pendency of the merger, as employees may experience uncertainty about their roles with Envestnet following
the merger. In addition, the merger agreement restricts us from making certain acquisitions and taking other specified actions
without the consent of Envestnet, and generally requires us to continue our operations in the ordinary course, until completion
of the merger. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion
of the merger.
Both we and Envestnet will incur significant transaction and merger-related costs in
connection with the merger.
Both we and Envestnet have incurred and will incur substantial expenses
in connection with the negotiation and completion of the transactions contemplated by the merger agreement.
Both we and Envestnet expect to continue to incur a number of non-recurring
costs associated with completing the merger, combining the operations of the two companies and achieving desired synergies. These
fees and costs have been, and will continue to be, substantial. The substantial majority of non-recurring expenses will consist
of transaction costs related to the merger and include, among others, employee retention costs, fees paid to financial, legal and
accounting advisors and benefit costs and filing fees.
These costs described above, as well as other unanticipated costs and
expenses, could have a material adverse effect on the financial condition and operating results of Envestnet following the completion
of the merger.
The merger agreement limits our ability to pursue alternatives to the merger.
The merger agreement contains provisions that may discourage a third
party from submitting an acquisition proposal to us that might result in greater value to our stockholders than the merger, or
may result in a potential competing acquirer proposing to pay a lower per share price to acquire us than it might otherwise have
proposed to pay. These provisions include a general prohibition on us from soliciting or, subject to certain exceptions relating
to the exercise of fiduciary duties by our Board, entering into discussions with any third party regarding any acquisition proposal
or offers for competing transactions. In addition, we may be required to pay Envestnet a termination fee of $17.8 million in certain
circumstances involving acquisition proposals for competing transactions.
The market price of Envestnet common stock may be affected by factors different from
those that historically have affected shares of our common stock.
Upon completion of the merger, holders of our common stock will become
holders of Envestnet common stock. Envestnet's business differs from ours, and accordingly the results of operations of Envestnet
will be affected by some factors that are different from those currently affecting our results of operations.
Risks Related to our Business
We have a history of losses and we may not maintain profitability in the future.
Except in 2010 and in 2013, we have not been profitable on an annual
basis since our formation. We experienced a net loss of $3.2 million and $1.6 million for the three months ended September
30, 2015 and 2014, respectively, and net loss of $8.8 million and $2.6 million for the nine months ended September 30, 2015
and 2014, respectively. As of September 30, 2015, our accumulated deficit was $366.1 million. While our revenue has grown in recent
periods, we were not profitable in the three and nine months ended September 30, 2015. Our revenue growth may not be sustainable
and we may not achieve sufficient revenue to achieve and maintain profitability. We expect to make significant future expenditures
related to the development and expansion of our business. In addition, as a public company, we are incurring significant legal,
accounting and other expenses that we did not incur as a private company. As a result of these expenditures, we must generate and
sustain increased revenue to achieve and maintain future profitability. We may incur significant losses in the future for a number
of reasons, including due to the other risks described in this Quarterly Report on Form 10-Q, and we may encounter
unforeseen expenses, difficulties, complications and delays and other unknown factors. We have encountered and will continue to
encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries. If we do not address
these risks successfully or if our assumptions regarding these risks and difficulties are incorrect or change in reaction to changes
in the market, our business could be harmed. Accordingly, we may not be able to maintain profitability and we may incur significant
losses for the foreseeable future.
We derive our revenue from subscriptions to a single software platform, and any factor
adversely affecting the Yodlee platform would harm our business and operating results.
We derive our revenue from subscriptions to a single software platform,
and related support and professional services. As such, any factor adversely affecting subscriptions to the Yodlee platform, including
those described elsewhere under “Risk Factors” or in other portions of this Quarterly Report on Form 10-Q, would harm
our business and operating results. In addition, while we intend to pursue new business initiatives, such as data analytics solutions
and market research services and revenue-sharing arrangements with third-party developers of FinApps, we cannot be sure that we
will recognize significant revenue from those sources. The viability of these business opportunities depends on the continued success
of the Yodlee platform, and our strategy to derive revenue from those activities would suffer if subscriptions to the Yodlee
platform were adversely affected.
Revenue derived from sales to our three largest customers, as a group, represented
approximately 22.8% and 20.7% of our total revenue during the three and nine months ended September 30, 2015, respectively, and
approximately 26.1% and 25.8% of our total revenue during the three and nine months ended September 30, 2014, respectively, and
we expect to continue to derive a significant portion of our revenue from a small number of customers.
The financial services industry in the United States is highly concentrated,
with a small number of large financial institutions holding a majority of total assets held by all U.S. financial institutions.
Because a portion of our business is targeted at this industry and our largest customers include 12 of the 20 largest banks
in the United States (based on total assets as of June 30, 2015), a significant portion of our revenue is concentrated among a
small number of these large financial institution customers. As a percentage of total revenue, revenue derived from our three largest
customers, as a group, was approximately 22.8% and 20.7% during the three and nine months ended September 30, 2015, respectively,
and approximately 26.1% and 25.8% during the three and nine months ended September 30, 2014, respectively. Although our revenue
is beginning to become less concentrated among our largest customers and broadening across both our FI and YI customer base, we
anticipate that revenue from a small group of customers will continue to account for a significant portion of our revenue in future
periods. It would be difficult to replace any of our largest customers or the revenue derived from such customers. In addition,
any publicity associated with the loss of any of our largest customers could harm our reputation, making it more difficult to attract
and retain other large customers, and could weaken our negotiating position with respect to our remaining and prospective customers.
There can be no assurance that we will be able to continue our relationships
with any of our largest customers on the same or more favorable terms in future periods or that our relationships will continue
beyond the terms of our existing contracts with them. Our revenue and operating results could suffer if, among other things, any
of our largest customers were to renegotiate, terminate, renew on less favorable terms or fail to renew their agreement with us.
Because some of our sales efforts are targeted at large financial institutions and
large Internet services companies, we face prolonged sales cycles, substantial upfront sales costs and less predictability in completing
some of our sales. If our sales cycle lengthens, or if our upfront sales investments do not result in sufficient revenue, our operating
results may be harmed.
We target a portion of our sales efforts at large financial institutions
and large Internet services companies, which presents challenges that are different from those we encounter with smaller customers.
Because our large customers are often making an enterprise-wide decision to deploy our solutions, we face longer sales cycles,
complex customer requirements, substantial upfront sales costs, significant contract negotiations and less predictability in completing
sales with these customers. Our sales cycle can often last one year or more with our largest customers, who often undertake an
extended evaluation process, but is variable and difficult to predict and can be longer or shorter. If we continue to expand globally,
we anticipate that we may experience even longer sales cycles, more complex customer needs, higher upfront sales costs and less
predictability in completing sales with our larger customers and customers located outside of the United States. If our sales cycle
lengthens or our upfront sales investments do not generate sufficient revenue to justify our investments in our sales efforts,
our operating results may be harmed.
Failure of our customers to deploy our solutions in a timely and successful manner
could negatively affect our revenue and operating results.
The timing of revenue from our customers depends on a number of factors
outside of our control and may vary from period to period. Our customers may request customization of our solutions for their systems
or engage in a prolonged, internal decision making process regarding the deployment of our solutions. Among our larger customers,
deployment of our solutions can be a complex and prolonged process and requires integration into the existing platform on our customers’
systems. Any delay during the deployment process related to technical difficulties experienced by our customers or us in integrating
our solutions into our customers’ systems could further lengthen the deployment period and create additional costs or customer
dissatisfaction. During the deployment period, we expend substantial time, effort, and financial resources in an effort to assist
our customers with the deployment. Some of our customers may ultimately decide that it is not in the best interest of their business
to deploy our solutions at all. We generally are not able to recognize the full potential value of our customer contracts until
our customers actually deploy our solutions, though our contracts typically provide that minimum payments are due beginning on
a specified date whether or not deployments are completed by that date. Cancellation of any deployment after it has begun could
result in lost time, effort, and expenses invested in the cancelled deployment process, and would adversely affect our ability
to recognize revenue that we anticipated at the time of the execution of the related customer contract. If our customers do not
timely and successfully deploy our solutions, our future revenue and operating results could be negatively impacted.
Our future success depends upon our customers’ active and effective promotion
of our solutions.
Our success depends on our customers, their willingness to effectively
promote our solutions to their end users, and their end users’ adoption and use of our solutions. In general, our contracts
with our customers allow them to exercise significant discretion over the promotion of our solutions, and they could give higher
priority to other products or services they offer. Accordingly, losing the support of our customers would likely limit or reduce
the use of our solutions and the related revenue. Our revenue may also be negatively affected by our customers’ operational
decisions. For example, if a customer implements changes in its systems that disrupt the integration between its systems and ours,
we could experience a decline in the use of our solutions. Even if our customers actively and effectively promote our solutions,
there can be no assurance that their efforts will result in increased usage of our solutions by their end users or the growth of
our revenue. Failure of our customers to effectively promote our solutions, and of their end users to increasingly adopt and use
our solutions, could have a material adverse effect upon our future revenue and operating results.
Our reputation is critical to our business, and if our reputation is harmed our business
and operating results could be adversely affected.
Our reputation, which depends on earning and maintaining the trust and
confidence of our current and potential customers and end users, is critical to our business. Our reputation is vulnerable to many
threats that can be difficult or impossible to control, and costly or impossible to remediate. Regulatory inquiries or investigations,
data security breaches, lawsuits, employee misconduct, perceptions of conflicts of interest and rumors, among other developments,
could substantially damage our reputation, even if they are baseless or satisfactorily addressed. In addition, any perception that
the quality of our solutions may not be the same or better than that of other providers could also damage our reputation. Any damage
to our reputation could harm our ability to attract and retain customers and key personnel and adversely affect our operating results.
Attempts to repair our reputation, if damaged, may be costly and time consuming, and such efforts may not ultimately be successful.
Our hosting, collection, use and storage of customer information and data require the
implementation of effective security controls, and a data security breach could disrupt our business, result in the disclosure
of confidential information, expose us to liability and protracted and costly litigation, adversely affect our reputation and revenue
and cause losses.
We and our customers through which our solutions are made available
to end users, collect, use, transmit and store confidential end user-permissioned financial information such as bank account numbers,
portfolio holdings, credit card data and outstanding debts and bills. The measures we take to provide security for collection,
use, storage, processing and transmission of confidential end user information may not be effective to protect against data security
breaches by third parties. We use commercially available security technologies, including hardware and software data encryption
techniques and multi-layer network security measures, to protect transactions and information. Although we encrypt data fields
that typically include sensitive, confidential information, other unencrypted data fields may include similar information that
could be accessible in the event of a security breach. We use security and business controls to limit access and use of confidential
end user information. However, a portion of the security protection begins with our customers because they are the initial point
of user authentication of hosted solutions. Although we require our Internet services customers and third-party suppliers to implement
controls similar to ours, the technologies and practices of our customers and third-party suppliers may not meet all of the requirements
we include in our contracts and we may not have the ability to effectively monitor the implementation of security measures of our
customers and third-party suppliers. In many cases, our customers build and host their own web applications and access our solutions
through our APIs. In these cases, additional risks reside in the customer’s system with respect to security and preventive
controls. As a result, inadequacies of our customers’ and third-party suppliers’ security technologies and practices
may only be detected after a security breach has occurred. Errors in the collection, use, storage or transmission of confidential
end user information may result in a breach of privacy or theft of assets.
The risk of unauthorized circumvention of our security measures has
been heightened by advances in computer capabilities and the increasing sophistication of hackers. Criminals are using increasingly
sophisticated techniques to engage in illegal activities involving solutions such as ours or end user information, such as counterfeiting,
fraudulent payment and identity theft. Because the techniques used by hackers change frequently and generally are not recognized
until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures.
In addition to hackers, it is possible that a customer could gain unauthorized access to our database through the use of our solutions.
Improper access to our systems or databases by hackers or customers intending to commit criminal activities could result in the
theft, publication, deletion or modification of confidential end user information. An actual or perceived breach of our security
may require notification under applicable data privacy regulations.
A data security breach of the systems on which sensitive user data and
account information are stored could lead to claims or regulatory actions against us. If we are sued in connection with any data
security breach, we could be involved in protracted and costly litigation. If unsuccessful in defending that litigation, we might
be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse
effect on our revenue and profitability. Our customer contracts typically include security standards that must be complied with
by us and our customers. If a data security breach occurs and we have not been in compliance with the security standards included
in our applicable contracts, we could be liable for breach of contract claims brought by our customers. We could also be required
to indemnify our customers for third-party claims, fines, penalties and/or other assessments imposed on our customers as a result
of any data security breach and our liability could exceed our insurance coverage or ability to pay.
Our security procedures and technologies are regularly audited by independent
security auditors engaged by us, and many of our prospective and current customers conduct their own audits or review the results
of such independent security audits as part of their evaluation of our solutions. We are also periodically audited by regulatory
agencies to whom our operations or our customers are subject, including The Office of the Comptroller of the Currency, or the OCC,
which is the Agency in Charge of multi-agency supervisory examinations of our operations. Adverse findings in these audits or examinations,
even if not accompanied by any data security breach, could adversely affect our ability to maintain our existing customer relationships
and establish new customer relationships.
Data security breaches, acts of fraud involving our solutions, or adverse
findings in security audits or examinations, could result in reputational damage to us, which could reduce the use and acceptance
of our solutions, cause our customers to cease doing business with us and have a significant adverse impact on our revenue and
future growth prospects. Further, any of these events could lead to additional regulation and oversight by federal and state agencies,
which could impose new and costly compliance obligations and may lead to the loss of our ability to make our solutions available.
Privacy concerns could have an adverse impact on our revenue and harm our reputation
and may require us to modify our operations.
As part of our business, we use, transmit and store end user-permissioned,
non-identified transaction data elements. We are subject to laws, rules and regulations relating to the collection, use, and security
of end user data. For privacy or security reasons, privacy groups, governmental agencies and individuals may seek to restrict or
prevent our use of this data. New laws in this area have been passed by several jurisdictions, and other jurisdictions are considering
imposing additional restrictions. These new laws may be interpreted and applied inconsistently from jurisdiction to jurisdiction
and our current data protection policies and practices may not be consistent with those interpretations and applications. In addition,
the ability to execute transactions and the possession and use of personal information and data in conducting our business subjects
us to legislative and regulatory burdens that may require notification to customers or employees of a security breach, restrict
our use of personal information, hinder our ability to acquire new customers or market to existing customers, require us to modify
our operations and have an adverse effect on our business, financial condition and operating results. We have incurred, and will
continue to incur, significant expenses to comply with privacy and security standards and protocols imposed by law, regulation,
industry standards or contractual obligations. As our business continues to expand to new industry segments that may be more highly
regulated for privacy and data security, and to countries outside the United States that have more strict data protection laws,
our compliance requirements and costs may increase.
If sources from which we obtain information limit our access to such information or
charge us fees for accessing such information, our business could be materially and adversely harmed.
Our solutions require certain data that we obtain from thousands of
sources, including banks, other financial institutions, retail businesses and other organizations, some of which are not our current
customers. As of September 30, 2015, we receive 75% of this data through structured data feeds that are provided under the terms
of our contracts with most of our financial institution, or FI, customers. Although all of the information we currently gather
is end user-permissioned, non-identified data and, currently, we generally have free, unrestricted access to, or ability to use,
such information, one or more of our current customers could decide to limit or block our access to the data feeds we currently
have in place with these customers due to factors outside of our control such as more burdensome regulation of our or our customers’
industry, increased compliance requirements or changes in business strategy. If the sources from which we obtain information that
is important to our solutions limit or restrict our ability to access or use such information, we may be required to attempt to
obtain the information, if at all, through end user-permissioned data scraping or other means that could be more costly and time-consuming,
and less effective or efficient. In the past, a limited number of third parties, primarily airline and international sites, have
either blocked our access to their websites or requested that we cease employing data scraping of their websites to gather information,
and we could receive similar, additional requests in the future. Any such limitation or restriction may also preclude us from providing
our solutions on a timely basis, if at all. In addition, if in the future one or more third parties challenge our right to access
information from these sources, we may be required to negotiate with these sources for access to their information or to discontinue
certain services currently provided by our solutions. The legal environment surrounding data scraping and similar means of obtaining
access to information on third-party websites is not completely clear and is evolving, and one or more third parties could assert
claims against us seeking damages or to prevent us from accessing information in that manner. In the event sources from which we
obtain this information begin to charge us fees for accessing such information, we may be forced to increase the fees that we charge
our customers, which could make our solutions less attractive, or our gross margins and other financial results could suffer.
Failure by our customers to obtain proper permissions and waivers might result in claims
against us or may limit or prevent our use of data, which could harm our business.
We require our customers to provide necessary notices and to obtain
necessary permissions and waivers for use and disclosure of information through our solutions. Our contracts with our customers
include assurances from them that they have done so and will do so, but we do not audit our customers to ensure that they have
acted, and continue to act, consistent with such assurances. If, despite these requirements and contractual obligations, our customers
do not obtain necessary permissions and waivers, then our use and disclosure of information that we receive from them or on their
behalf might be limited or prohibited by federal, state or foreign privacy laws or other laws. Such a failure to obtain proper
permissions and waivers could impair our functions, processes and databases that reflect, contain, or are based upon such data
and might prevent use of such data. In addition, such a failure could interfere with, or prevent creation or use of, rules, analyses,
or other data-driven activities that benefit us and our business. Moreover, we might be subject to claims or liability for use
or disclosure of information by reason of lack of valid notices, agreements, permissions or waivers. These claims or liabilities
could subject us to unexpected costs and adversely affect our operating results.
We operate in a highly regulated environment, and failure by us or financial institutions
and other customers through which our solutions are made available to comply with applicable laws and regulations could have an
adverse effect on our business, financial position and operating results.
We operate in a highly regulated environment at the federal, state and
international levels, and failure by us or FIs and other customers through which our solutions are made available to comply with
the laws and regulations to which we and they are subject could negatively impact our business. In particular, our solutions are
subject to a strict set of legal and regulatory requirements intended to protect consumers and to help detect and prevent money
laundering, terrorist financing and other illicit activities. Although we have internal controls in place to comply with applicable
regulations, we cannot guarantee that our internal controls will always be effective in ensuring such compliance. Our FI customers
and prospective customers are highly regulated and may be required to comply with stringent regulations in connection with subscribing
to and implementing our solutions.
We are examined on a periodic basis by various regulatory agencies.
For example, we are a supervised third-party technology service provider subject to multi-agency supervisory examinations in a
wide variety of areas based on published guidance by the Federal Financial Institutions Examination Council. These examinations
include examinations of our management, acquisition and development activities, support and delivery, IT, and disaster preparedness
and business recovery planning. The OCC is the Agency in Charge of these examinations. If deficiencies are identified, customers
may choose to terminate or reduce their relationships with us. As a result of obligations under our customer agreements, we are
required to comply with certain provisions of the Gramm-Leach-Bliley Act, or GLBA, related to the privacy of consumer information
and may be subject to other privacy and data security laws because of the solutions we provide. In addition, numerous regulations
have been proposed and are still being written to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
or the Dodd-Frank Act, for enhanced due diligence of the internal systems and processes of companies like ours by their FI customers.
If we are required to make changes to our internal processes and solutions as result of this heightened scrutiny, we could
be required to invest substantial additional time and funds and divert time and resources from other corporate purposes to remedy
any identified deficiency.
Money movement services are potentially subject to regulation under
a variety of federal and state laws, including state statutes regulating “money transmitters” and federal laws, such
as the Bank Secrecy Act and the regulations thereunder, which regulate “money transmitting businesses” and “money
services businesses.” Many of these statutes are broadly worded and have not been subject to published judicial or administrative
interpretation. While we believe that our money movement solutions comply with, or are exempt from, all applicable laws, as we
conduct these services on behalf of regulated financial institutions, it is possible that one or more regulatory agencies could
take the position that we are not in compliance or that we are required to register as a money transmitter in order to provide
our money movement solutions. In addition, new laws or regulations, or interpretations of existing laws or regulations, could subject
us to additional regulatory requirements. If we were prevented from operating our money movement solutions in one or more states,
our ability to provide our money movement solutions would suffer as our customers generally require that our money movement solutions
handle payments in all states. Moreover, if we were required to be licensed in one or more states, the licensing process could
be time-consuming and expensive.
Many of these laws and regulations are evolving, unclear and inconsistent
across various jurisdictions, and ensuring compliance with them is difficult and costly. Changes in laws and regulations or interpretations
of existing laws and regulations may occur that could increase our compliance and other costs of doing business, require significant
systems redevelopment, substantially change the way that banks and other FIs are regulated and able to offer their products to
consumers, or render our solutions less profitable or obsolete, any of which could have an adverse effect on our operating results.
Currently, the Consumer Financial Protection Bureau, or CFPB, has exclusive rulemaking authority under the GLBA, and many of our
customers are subject to regulatory enforcement by the CFPB and/or the Federal Trade Commission, or FTC. It is difficult to predict
future regulatory requirements that may be enacted by the CFPB, the manner in which such regulatory requirements will be enforced
by the CFPB or the FTC, and the impact such requirements or enforcement actions may have on our or our customers’ business.
Compliance with any new regulatory requirements may divert internal resources and be expensive and time-consuming. In order to
comply with new regulations, we may be required to increase investment in compliance functions or new technologies. Failure to
comply with the laws and regulations to which we are subject could result in fines, penalties or limitations on our ability to
conduct our business, or federal or state actions, any of which could significantly harm our reputation with consumers, banks and
regulators, and could materially and adversely affect our business, operating results and financial condition.
If we are unable to expand our business with our existing customers, our business and
ability to increase our revenue may suffer.
Our ability to increase our revenue depends in part on increasing revenue
from our existing customers. We intend to seek to increase penetration among our existing customer base, both by increasing
usage of product offerings in business units we currently serve and by expanding into new business units. However, the adoption
of our solutions by specific business units of our existing customers does not necessarily indicate that we will be successful
in expanding usage into other business units, which may have different needs, priorities and budgetary and other constraints. In
addition, while we intend to introduce features and applications that will make our solutions increasingly attractive to end
users, we cannot be certain that we will be successful in increasing usage of our solutions with existing customers. If we are
unable to expand our business as we anticipate, our revenue could decrease and our business could be harmed.
If we do not successfully market and sell our solutions to new customers, including
Internet services companies, our revenue growth will be harmed.
Our ability to increase our revenue depends in part on our ability to
attract new customers, including additional FI customers and new Internet services companies providing innovative financial solutions,
or YI customers. While we believe that there are significant opportunities for sales to additional FIs, both in the United
States and in international markets, we cannot be sure that we will be successful in achieving broader adoption of our solutions
by FIs. Our future revenue growth is also dependent upon the continued purchase of our solutions by YI customers. Adoption
and purchase of our solutions by these companies is still relatively new, and it is unclear if our solutions will be broadly adopted
and purchased by these companies or the speed of any such adoption and purchases.
Increased revenue from YI customers may expose us to additional risks.
Our revenue from YI customers has increased in recent periods, and we
expect that such customers will be increasingly important to our business in future periods. Some of these customers are smaller
and may not be as financially stable as our FI customers and may not have the experience and resources relating to data security
and operations that our FI customers generally have. Accordingly, although our contracts with these customers require them to,
among other things, adhere to standards for data security and obtain necessary consents and waivers from end users to use their
financial and other information, as we increase our business with YI customers we may be subject to an increased risk that one
or more of such customers may fail to comply with these obligations and that such customers may not have the financial resources
to satisfy any resulting indemnity obligations to us. If our YI customers experience financial difficulties, are limited by a lack
of internal resources or otherwise fail to comply with their contractual obligations relating to data security, our revenue generated
from these customers may suffer, our reputation could be harmed and we could be exposed to third-party claims.
We cannot be certain that we will be successful in increasing our revenue by introducing
new revenue streams.
Important factors to our future growth include continued development
and marketing of financial applications to make the Yodlee platform increasingly attractive to existing customers with the need
for applications or combinations of applications tailored to their specific needs. In addition, we intend to seek to derive additional
revenue by providing data analytics solutions and market research services and are pursuing revenue-sharing opportunities with
third-party developers of FinApps on the Yodlee platform. Each of these initiatives has individual challenges and risks. To market
and sell data analytics solutions and market research services successfully, we must continue to enhance our capabilities relating
to the enrichment of massive data sets in order to provide tailored data analytics services that appeal to the markets that we
target, as well as develop additional capabilities in data solutions. We have only recently begun to derive revenue from the sale
of data analytics solutions and market research services but it is becoming a more important factor in our financial results. In
order to increase sales of data analytics solutions and market research services, we will need to expand our sales and marketing
capabilities. In addition, for FinApps to appeal to existing customers, or new customers, these applications must offer the functionality
and user experience that is responsive to their needs and valued by end users. Moreover, we have not derived significant revenue
to date from revenue-sharing arrangements with third-party developers of FinApps on the Yodlee platform, and we cannot be sure
that we will enter into a substantial number of these arrangements or that any such arrangements will be successful. We cannot
be certain that any of the activities described above will contribute to substantial additional revenue from the Yodlee platform
or introduce substantial new revenue streams.
If our operations are interrupted as a result of service downtime or interruptions,
our business and reputation could suffer.
The success of our business depends upon our ability to obtain and deliver
time-sensitive, up-to-date data and information. Our operations and those of third parties on whom we rely for information and
transaction processing services are vulnerable to interruption by technical breakdowns, computer hardware and software malfunctions,
software viruses, infrastructure failures, fire, earthquake, power loss, telecommunications failure, terrorist attacks, wars, Internet
failures and other events beyond our control. Any disruption in our solutions or operations, or those of third parties on whom
we rely, could affect the ability of our solutions to perform effectively which in turn could result in a reduction in revenue.
In addition, our contracts with our customers often include stringent requirements for us to maintain certain levels of performance
and service availability. Failure by us to meet these contractual requirements could result in a claim for substantial damages
against us, regardless of whether we are responsible for that failure. Our customers may also delay or withhold payment to us,
elect to terminate or not to renew their contracts with us, or refuse to integrate our solutions into their online offerings, or
we could lose future sales to new customers as a result of damage to our reputation due to such service downtime or interruptions.
If we suffer a significant database or network facility outage, our business could experience disruption until we fully implement
our back-up systems. The occurrence of any such disruptions in our solutions could materially and adversely affect our business.
If customers are unwilling to use our cloud-based solutions, our customer base may
not grow or may decrease and our business could be harmed.
The cloud computing market is not as mature as the market for enterprise
software, and it is uncertain whether cloud computing will achieve and sustain high levels of customer demand and market acceptance.
Many enterprises have invested substantial personnel and financial resources to integrate legacy enterprise software into their
businesses and are more familiar and comfortable with this type of infrastructure. Because our solutions involve the aggregation,
storage and use of confidential information and related data, some customers, in particular customers located outside of the United
States, may be reluctant or unwilling to migrate to our cloud-based solutions due to a lack of perceived cost and performance benefits
associated with cloud-based solutions, and concerns regarding the ability of cloud computing companies to adequately address security
and privacy concerns. If other cloud-based solutions experience security incidents, loss of customer data, disruptions in delivery
or other problems, these concerns and perceptions regarding the market for cloud computing as a whole may be further negatively
affected. If customers are unwilling to accept our cloud-based solutions as a result of these perceptions and concerns, we may
be required to develop other alternative solutions for these customers, which would be time-consuming and costly and could negatively
affect our gross margins. In addition, negative perceptions and concerns regarding cloud computing could cause the growth of our
customer base to slow, which could result in decreased revenue and harm to our business.
Our revenue and operating results can fluctuate from period to period, which could
cause our share price to fluctuate.
Our revenue and operating results have fluctuated in the past and may
fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. If our operating
results fall below the expectations of investors or any securities analysts who follow our common stock, the trading price of our
common stock could decline substantially. Factors relating to our business that may contribute to these fluctuations include the
following, as well as other factors described elsewhere in this Quarterly Report on Form 10-Q:
· |
the timing and extent of our customers’ deployment and promotion of our solutions, including the associated professional services revenue; |
· |
the timing of our customers’ renewals or any terminations of their contracts with us; |
· |
rate of expansion or contraction of our customer base; |
· |
changes in laws or regulatory policies that could impact our ability to offer our solutions to FIs or other customers; |
· |
the timing and success of the introduction of new solutions by us or competitors; |
· |
unanticipated delays of rollouts of our solutions; |
· |
downward pressure on fees we charge for our solutions; |
· |
our ability to control costs, including third-party service provider costs and sales and marketing expenses in an increasingly competitive market; |
· |
the amount and timing of operating costs related to the maintenance and expansion of our business, operations and infrastructure, including globally; |
· |
changes in customers’ budgets; |
· |
changes to economic terms in contracts with customers, including renegotiations or unanticipated changes to the relationship; |
· |
fluctuations in currency exchange rates and in our effective tax rate; and |
· |
general economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers operate. |
In addition, our revenue has usually been the strongest during the last
two quarters of the year due to the terms of existing customer contracts with certain of our largest customers and associated revenue
recognition, and timing of our customers’ deployment of our solutions and associated professional services revenue. Although
we expect this trend to continue in the future, historical patterns should not be considered indicative of our future results.
As a result of these and other factors, we believe that period-to-period
comparisons of our revenue and operating results may not be meaningful and should not be relied upon as indications of our future
revenue or operating performance.
We rely significantly on revenue from subscriptions, which may decline or may fluctuate
based on the timing of renewals, and, because we recognize revenue from subscriptions over the term of the relevant subscription
period, downturns or upturns in sales are not immediately reflected in full in our operating results.
Our subscription revenue accounted for approximately 88% and 85% of
our total revenue for the three and nine months ended September 30, 2015 and 2014, respectively. Customers that purchase our subscriptions
have no contractual obligation to renew their contracts after the initial contract period, which are typically three years, and
we may not maintain our historical subscription renewal rates. Although customer contracts are generally non-cancellable during
a specified period of time, customers typically have the right to terminate their contracts for a fee before the expiration of
the entire initial contract period. New or renewal subscriptions may decline or fluctuate as a result of a number of factors, including
our customers’ and end users’ level of satisfaction with our solutions and our customer support; the frequency and
severity of subscription outages; the functionality and performance of our solutions; the timeliness and success of product enhancements
and introductions by us and those of our competitors; the prices of our solutions; the prices of solutions offered by our competitors
or reductions in our customers’ spending levels. If new or renewal subscriptions decline, our revenue or revenue growth may
decline, and our business may suffer.
In addition, we recognize subscription revenue over the term of the
relevant subscription period based on the terms of the applicable customer contract. As a result, most of the revenue we report
each quarter is the recognition of billings from subscriptions entered into during previous quarters. Consequently, a decline in
new or renewal subscriptions in any one quarter will not be fully reflected in revenue in that quarter, but will negatively affect
our revenue in future quarters. Accordingly, the effect of significant downturns in new or renewed sales of our solutions would
not be reflected in full in our results of operations until future periods.
Because a portion of our revenue depends on the usage of our platform by end users,
it may be difficult to evaluate our future prospects.
Our subscription contracts with our customers generally contain a minimum
subscription fee, and usage-based fees which depend on the extent their customers or end users use our platform. This usage-based
aspect to our pricing model makes it difficult to accurately forecast revenue because end users’ activities on our platform
may vary from period to period based on a variety of factors, including personal financial circumstances, privacy and security
concerns regarding online solutions such as ours, seasonality or other factors. As a result, historical revenue from a customer
may not be a good indicator of our future revenue from that customer and changes in end user activity may limit our ability to
forecast revenue.
Material defects or errors in the software we use to deliver our solutions or in the
information we gather and disclose could harm our reputation, result in significant costs to us and impair our ability to sell
our solutions.
The software applications underlying our solutions are inherently complex
and may contain material defects or errors, particularly when first introduced or when new versions or enhancements are released.
From time to time, we provide incremental releases of software updates and functional enhancements. Such new versions frequently
contain undetected errors when first introduced or released. We have from time to time found defects in our solutions, and new
errors in our existing solutions may be detected in the future. In addition, errors may result from the interface of our solutions
with legacy systems and data, which we did not develop and the function of which is outside of our control.
Defects or errors in the information we gather from third parties or
in storing end users’ data, in processing payment transactions, or that cause interruptions to the availability of our solutions
could result in a reduction in sales or delay in market acceptance of our solutions, sales credits or refunds to our customers,
loss of existing customers and difficulty in attracting new customers, diversion of development resources, harm to our reputation,
and increased service and maintenance costs, and expose us to potential liability to our customers. We may not be able to identify
or resolve these defects or errors in a timely manner. Correction of defects or errors could prove to be impossible or impracticable.
The costs incurred in correcting any material defects or errors in our solutions or the information we provide, or in responding
to resulting claims or liability, may be substantial. Resolving a defect or error and implementing remedial measures would likely
divert the attention and resources of our management and key technical personnel from other business concerns, and could be extremely
difficult if the underlying defect or error is located in a third party’s system or database.
Although we attempt to limit our contractual liability for consequential
damages in delivering our solutions, these limitations on liability may be unenforceable in some cases, or may be insufficient
to protect us from liability for damages. We maintain general liability insurance coverage, including coverage for errors or omissions;
however, this coverage may not continue to be available on reasonable terms or may be insufficient to cover one or more large claims.
An insurer might disclaim coverage as to any future claim. A successful assertion of one or more large claims against us that exceeds
our available insurance coverage or changes in our insurance policies, including premium increases or the imposition of a large
deductible or co-insurance requirement, could harm our operating results and financial condition.
If we fail to process transactions effectively or fail to adequately protect against
disputed or potential fraudulent activities, our revenue and earnings may be harmed.
We process a significant volume and dollar value of transactions on
a daily basis using our money movement solutions. Effective processing systems and controls are essential to ensure that transactions
are handled appropriately. Despite our efforts, it is possible that we may make errors or that funds may be misappropriated
due to fraud. If we are unable to effectively manage our systems and processes we may be unable to process money movement transactions
in an accurate, reliable and timely manner, which may harm our business. In addition, if we do not detect suspected fraudulent
or non-sufficient fund transactions within agreed-upon timelines, we may be required to reimburse our customers for the transactions
and such reimbursements may exceed the amount of the reserves we have established to make such payments.
The online payments industry has been experiencing an increasing amount
of fraudulent activities by third parties. Although we do not believe that any of this activity is uniquely targeted at our business,
this type of fraudulent activity may adversely impact us. In addition to any direct damages and potential fines that may result
from such fraud, which may be substantial, a loss of confidence in our controls may seriously harm our business and damage our
reputation. We may implement risk control mechanisms that could make it more difficult for legitimate end users to use our solutions,
which could result in lost revenue and negatively impact our operating results.
If we are unable to maintain our payment network with third-party service providers,
or if our disbursement partners encounter business difficulties, our business could be harmed.
Our payment network consists of a single Originating Deposit Financial
Institution, or ODFI, and a small number of bill payment processors. Our ODFI clears and processes the funds from the customer.
In the instance of funds transfers, the ODFI also processes funds to the end user’s destination institution. For bill payment,
funds are sent to the bill pay processors for disbursement to biller sites.
While we have entered into an agreement with our ODFI and each of our
bill payment processors, these partners could choose to terminate or not renew their agreements with us. If we are unable to maintain
our agreements with our current partners, or our current partners are unable to handle increased transaction volumes, our ability
to disburse transactions and our revenue and business may be harmed. If we are unable to sign new payment processors and/or ODFIs
under terms consistent with, or better than, those currently in place, our revenue and business may be harmed.
Payment processors and ODFI partners also engage in a variety of activities
in addition to providing our services and may encounter business difficulties unrelated to our services. Such activities or difficulties
could cause the affected partner to reduce the services provided, cease to do business with us, or cease doing business altogether.
This could lead to our inability to move funds on a timely basis as required to settle transactions. In addition, because we offer
next day automated clearing house transactions in certain cases, if a disbursement partner experiences insufficient liquidity or
ceases to do business, we may not be able to recover funds that are held with that disbursement partner which could harm our financial
condition and operating results.
We may also be forced to cease doing business with payment processors
and/or ODFIs if rules governing electronic funds transfers change or are reinterpreted to make it difficult or impossible for us
to operate our money movement solutions.
If we are unable to effectively compete, our business and operating results could be
harmed.
While we do not believe any single company in the financial services
space offers a comprehensive platform with diverse features such as ours, the following companies offer individual solutions that
compete with one or more of our solutions:
· |
for data aggregation: Intuit, Inc. and Fiserv, Inc. (CashEdge); |
· |
for personal financial management: Intuit (direct to consumer service) and internal IT departments of FIs, as well as early-stage companies; |
· |
for online bill pay: Fiserv and FIS Global Corporation; |
· |
for data products and services: global payment networks, credit bureaus and other institutions that have access to large pools of data; and |
· |
for account verification: MicroBilt Corporation and Early Warning Systems, LLC. |
Many of the companies that compete with one or more of our applications
have greater name recognition, substantially greater financial, technical, marketing and other resources, the ability to devote
greater resources to the promotion, sale and support of their solutions, more extensive customer bases and broader customer relationships,
longer operating histories, and greater name recognition than we have.
We expect competition to increase as other companies continue to evolve
their offerings and as new companies enter our market. New companies entering our market may choose to offer internally-developed
solutions at little or no additional cost to their end users by bundling them with their existing applications and solutions. Increased
competition is likely to result in pricing pressures, which could negatively impact our gross margins. If we are unable to effectively
compete, our revenue could decline and our business, operating results and financial condition could be adversely affected.
Our business could be harmed if we do not keep up with rapid technological change,
evolving industry standards or changing expectations and requirements of our customers.
We expect technological developments to continue at a rapid pace in
our industry. Our success will depend, in part, on our ability to:
· |
continue to develop our technology expertise; |
· |
recruit and retain skilled technology professionals; |
· |
effectively manage the technology associated with our business; |
· |
enhance our current solutions; |
· |
develop new solutions that meet our customers’ needs; and |
· |
influence and respond to emerging industry standards and other technological changes. |
In addition, we must continue to meet changing expectations and requirements
of our customers. We must accomplish all of these tasks in a timely and cost-effective manner, and our failure to do so could harm
our business, including materially reducing our revenue and operating results.
As a result of our customers’ increased usage of our platform, we will need to
continually improve our hosting infrastructure to meet our customers’ needs and avoid service interruptions or slower system
performance.
We have experienced significant growth in the number of transactions
and data that our hosting infrastructure supports. We seek to maintain sufficient excess capacity in our infrastructure to meet
the needs of all of our existing and new customers. A component of our growth strategy involves the establishment of additional
data centers in new locations. If our business continues to grow, we may also need to increase bandwidth, storage or other elements
of our infrastructure.
The amount of infrastructure needed to support our customers is based
on our estimates of anticipated usage. If we do not accurately predict our infrastructure capacity requirements, our customers
could experience service outages or slower system performance that may subject us to financial penalties and result in customer
losses, which could harm our reputation and adversely affect our revenue growth. In addition, increasing our infrastructure
as a result of experiencing unforeseen increases in usage or in anticipation of increased usage from new or existing customers
would cause us to have increased cost of revenue, which could adversely affect our gross margins until we sufficiently increase
revenue to offset the increased costs.
We rely on relationships with third-party service providers to conduct our business,
and our operating results and financial position could be materially and adversely affected if we fail to maintain these relationships
or we maintain them under new terms that are less favorable to us.
We rely on data center and other service providers in order to deliver
our solutions and operate our business. We also rely on software licenses from third parties and support from third parties for
the operation of our business by maintaining our physical facilities, equipment, power systems and infrastructure. The failure
of these third parties to provide acceptable and high quality services and technologies or to update their services and technologies
may result in a disruption to our business operations and our customers, which may reduce our revenue, cause us to lose customers
and damage our reputation. If we lose the services of one or more of our third-party service providers for any reason or if their
services are disrupted, for example due to viruses or denial of service or other attacks on their systems, or due to human error,
intentional bad acts, power loss, hardware failures, telecommunications failures, wars, terrorist attacks, earthquakes, or similar
catastrophic events, we could experience a disruption in our ability to offer our solutions and adverse perception of our solutions’
reliability, or we could be required to retain the services of replacement third-party service providers. Alternative arrangements
and services may not be available to us on commercially reasonable terms, if at all, or we may experience business interruptions
upon a transition to an alternative partner, either of which could increase our operating costs and harm our business.
If we are unable to effectively manage certain risks and challenges related to our
India operations, our business could be harmed.
Our India operations are a key factor to our success. We believe that
our significant presence in India provides certain important advantages for our business, such as direct access to a large pool
of skilled professionals and assistance in growing our business internationally. However, it also creates certain risks that we
must effectively manage. As of September 30, 2015, approximately 80% of our total employees were based in India. Wage costs in
India for skilled professionals are currently lower than in the United States for comparably skilled professionals. However, wages
in India are increasing at a faster rate than in the United States, which could result in us incurring increased costs for technical
professionals and reduced margins. There is intense competition in India for skilled technical professionals, and we expect such
competition to increase. As a result, we may be unable to cost-effectively retain our current employee base in India or hire additional
new talent. In addition, India has experienced significant inflation, low growth in gross domestic product and shortages of foreign
exchange. India also has experienced civil unrest and terrorism and, in the past, has been involved in conflicts with neighboring
countries. The occurrence of any of these circumstances could result in disruptions to our India operations, which, if continued
for an extended period of time, could have a material adverse effect on our business. If we are unable to effectively manage any
of the foregoing risks related to our India operations, our development efforts could be impaired, our growth could be slowed,
and our operating results could be negatively impacted.
As a global organization, our business is susceptible to risks associated with our
international operations and sales.
We currently maintain international operations in India, the United
Kingdom, Canada and Australia, lease space in other jurisdictions outside of the United States for the purpose of gathering data,
and have customers located around the globe. Managing a global organization and conducting sales outside of the United States
is difficult and time-consuming and introduces risks that we may not face with our operations and sales in the United States. These
risks include:
· |
the burdens of complying with a wide variety of foreign regulations, laws and legal standards, including privacy, data security, tax and employment, some of which may be more stringent than those of the United States; |
· |
regional data privacy laws that apply to the transmission of data across international borders; |
· |
lack of familiarity with, and unexpected changes in, foreign regulatory requirements; |
· |
customers’ unfamiliarity with and concerns regarding laws and regulations of the United States that may impact our business operations in their jurisdictions; |
· |
negative, local perception of industries and customers that we may pursue; |
· |
laws and business practices favoring local competitors; |
· |
localization of our solutions, including translation into foreign languages and adaptation for local practices and regulatory requirements; |
· |
different pricing environments and longer sales cycles; |
· |
longer accounts receivable payment cycles and difficulties in collecting accounts receivable; |
· |
difficulties in managing and staffing international operations; |
· |
reduced or varied protection for intellectual property rights in some countries; |
· |
compliance with laws and regulations for foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our solutions in certain foreign markets, and the risks and costs of compliance; |
· |
fluctuations in currency exchange rates; |
· |
potentially adverse tax consequences, including the complexities of foreign value added tax systems, difficulty in interpreting international tax laws and restrictions on the repatriation of earnings; |
· |
increased financial accounting and reporting burdens and complexities; and |
· |
political, social and economic instability abroad, terrorist attacks and security concerns in general. |
Operating in international markets also requires significant management
attention and financial resources. A component of our growth strategy involves the further expansion of our operations and the
development of new customer relationships internationally. As we seek to expand internationally, we will need to develop relationships
with additional partners and add internal capabilities to effectively manage the operational, financial, legal and regulatory requirements
and risks associated with our international operations. The investment we make and additional resources we use to expand our operations,
target new international customers, expand our presence globally within our existing customers and manage operational and sales
growth in other countries may not produce desired levels of revenue or profitability, which could adversely affect our business
and operating results.
Our future success depends on the continued services of our management team and our
ability to recruit, train and retain qualified and skilled employees, including research and development, sales, marketing and
support personnel.
Our ability to effectively develop and provide our solutions and maintain
and develop relationships with current and potential customers depends largely on the continued services of our management team
and our ability to attract, train, motivate and retain highly skilled professionals, particularly professionals with backgrounds
in sales, marketing, technology, customer support and financial management services. We believe that success in our business will
continue to be based upon the strength of our intellectual capital. For example, due to the complexity of our solutions and the
intellectual capital invested in our technology, the loss of personnel that are integral to the development of our solutions and
engineering efforts would harm our ability to maintain and grow our business. In addition, our customers depend on our professional
services team to assist them with the deployment of our solutions within their infrastructure and, after deployment, to help resolve
any issues relating to our solutions that may arise. A high level of support is an important factor in contract renewals and cross-selling
of our platform. Consequently, we must hire and retain employees with the technical expertise, skill set and industry knowledge
necessary to continue to develop our solutions and effectively manage our growing sales, support and marketing organizations to
ensure the growth of our business and the satisfaction of our customers.
We plan to continue to expand our engineering team, our direct sales
force and marketing teams, and our customer support teams both domestically and internationally. We believe there is significant
competition for professionals in these areas with the skills and technical knowledge necessary to develop the solutions and perform
the services we offer. Competition for these employees is particularly intense in the software and technology industries, including
in India where a significant portion of our employee headcount is located, and we may not be able to retain our existing employees
or be able to recruit and retain other highly qualified personnel in the future. In addition, new hires require significant training
and, in most cases, take significant time before they achieve full productivity. Our recent hires and planned hires may not become
as productive as we expect or may take longer to become productive than we anticipate. If we cannot hire, train and retain qualified
personnel, our ability to continue to conduct our business could be impaired and our revenue could decline.
If our intellectual property and technology are not adequately protected to prevent
use or appropriation by our competitors, our business and competitive position would suffer.
We rely on a combination of patent, copyright, service mark, trademark
and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary
rights, all of which provide only limited protection. As of September 30, 2015, we had 74 issued patents in the U.S. and foreign
jurisdictions as well as additional pending patents applications in the U.S. and foreign jurisdictions. Some of these patents relate
to technology that is included in our data aggregation platform and expire beginning in 2018. Any owned patents or patents that
may issue in the future from pending or future patent applications may not provide sufficiently broad protection, may be invalidated
or circumscribed or may not prove to be enforceable in actions against alleged infringers. In addition, recent changes to the patent
laws in the United States may bring into question the validity of certain categories of software patents. As a result, we may not
be able to obtain adequate patent protection for our software or effectively enforce any patents that issue in the future that
cover our software. Also, we cannot assure you that any future service mark or trademark registrations will be issued for pending
or future applications or that any registered service marks or trademarks will be enforceable or provide adequate protection of
our proprietary rights. Furthermore, effective patent, trademark, service mark, copyright and trade secret protection may not be
available in every country in which our services are available. Unauthorized copying or other misappropriation of our proprietary
technologies could enable third parties to benefit from our technologies without paying us for doing so, which could harm our business.
We endeavor to enter into agreements with our employees and contractors
and agreements with parties with whom we do business to limit access to and disclosure of our proprietary information. The steps
we have taken may be inadequate to prevent the misappropriation of our proprietary technology. There can be no assurance that others
will not develop or patent similar or superior technologies, products or services.
Policing the unauthorized use of proprietary technology is difficult
and expensive and our monitoring and policing activities may not be sufficient to identify any misappropriation and protect our
proprietary technology. In addition, third parties may knowingly or unknowingly infringe our patents, trademarks and other intellectual
property rights, and litigation may be necessary to protect and enforce our intellectual property rights. If litigation is necessary
to protect and enforce our intellectual property rights, any such litigation could be very costly, could divert management attention
and resources and may not be successful, even when our rights have been infringed. For example, on December 2, 2014, we filed a
complaint in the United States District Court for the District of Delaware alleging that Plaid Technologies Inc. (“Plaid”)
has and is continuing to infringe on seven of our U.S. patents. The complaint seeks unspecified monetary damages, enhanced
damages, interest, fees, expenses, costs and injunctive relief against Plaid. It is too early to predict the outcome
of these legal proceedings or whether an adverse result would have a material adverse impact on our operations or financial position.
For additional information concerning the lawsuit, see Part II, Item 1, “Legal Proceedings” in this Quarterly Report
on Form 10-Q.
We also expect that the more successful we are, the more likely it becomes
that competitors will try to develop products that are similar to ours, which may infringe on our proprietary rights. If we are
unable to protect our proprietary rights or if third parties independently develop or gain access to our or similar technologies,
our business, revenue, reputation and competitive position could be harmed.
Assertions by a third party that we are infringing on its intellectual property, whether
successful or not, could subject us to costly and time-consuming litigation, expensive licenses or substantial indemnity obligations
and may prevent us from selling our products and services.
The software and technology industries are characterized by the existence
of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement
or other violations of intellectual property rights. Although we have not suffered a material loss from third-party claims to date,
from time to time, we face allegations that we or our customers have infringed, misappropriated or violated intellectual property
rights. Litigation may be necessary to determine the validity and scope of third-party intellectual property rights. Some of the
claims may involve patent holding companies or non-practicing entities who have no relevant product revenue of their own, and against
whom our own patents may provide little or no deterrence. Our technologies may not be able to withstand third-party claims or rights
against their use. Additionally, although we have licensed from other parties proprietary technology covered by patents, we cannot
be certain that any such patents will not be challenged, invalidated or circumvented.
Furthermore, many of our agreements require us to indemnify our customers
for certain third-party intellectual property infringement claims, which could increase our costs as a result of defending such
claims and may require that we pay damages if there were an adverse ruling related to any such claims. Such indemnity claims are
often difficult to assess, particularly at an early stage and without significant further investigation, as the third-party intellectual
property claims at issue often relate to features or functions offered by our customers that include a combination of our customers’
solutions and those of third parties, as well as those provided by our platform; we may not have complete information regarding
the infringement claims being asserted by the third party; and there may exist substantial questions relating to the validity of
the third-party intellectual property alleged to be infringed. In addition, even if third-party infringement claims are successful,
we may have defenses that limit or eliminate our indemnification obligations. Although we have not been obligated to pay material
amounts pursuant to such indemnification claims in the past, we could be obligated to do so in the future, and any such indemnity
obligations could significantly exceed the revenues that we have derived under the related customer contract. These types of claims
could harm our relationships with our customers, may deter future customers from subscribing to our services and could expose us
to litigation for these claims. Even if we are not a party to any litigation between a customer and a third party, an adverse outcome
in any such litigation could make it more difficult for us to defend our intellectual property in any subsequent litigation in
which we are a named party.
Any intellectual property rights claim against us or our customers,
with or without merit, could be time-consuming and expensive to litigate or settle, and could divert management attention and financial
resources. An adverse determination also could cause us to have to pay damages, modify our solutions or the Yodlee platform, stop
using technology found to be in violation of a third party’s rights or prevent us from offering our solutions to our
customers. In addition, we may have to seek a license for the technology, which may not be available on reasonable terms, if at
all, or procure or develop substitute solutions that do not infringe.
Our use of “open source” software could negatively affect our ability to
sell our solutions and subject us to possible litigation.
Portions of the Yodlee platform and our solutions incorporate so-called
“open source” software, and we may incorporate additional open source software in the future. Open source software
is generally licensed by its authors or other third parties under open source licenses. If we fail to comply with these licenses,
we may be subject to specified conditions, including requirements that we offer our solutions that incorporate the open source
software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating
or using the open source software and that we license such modifications or derivative works under the terms of the particular
open source license. If an author or other third party that distributes open source software that we use were to allege that we
had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses
defending against such allegations and could be subject to significant damages, including being enjoined from the sale of our solutions
that contained the open source software and could be required to comply with the foregoing conditions, which could disrupt the
sale of the affected solution. In addition, there have been claims challenging the ownership of open source software against companies
that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming ownership
of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating
results and financial condition and require us to devote additional research and development resources to change our solutions.
Litigation or investigations could result in significant settlements, fines or penalties.
We have been the subject of general litigation in the past, and could
be the subject of litigation, including class actions, and regulatory or judicial proceedings or investigations in the future.
The outcome of litigation and regulatory or judicial proceedings or investigations is difficult to predict. Plaintiffs or regulatory
agencies in these matters may seek recovery of very large or indeterminate amounts or seek to have aspects of our business suspended
or modified. The monetary and other impact of these actions may remain unknown for substantial periods of time. The cost to defend,
settle or otherwise resolve these matters may be significant. For example, we, each members of our board of directors, Envestnet,
Inc., a Delaware corporation (“Envestnet”), and Yale Merger Corp., a Delaware corporation (“Merger Sub”)
have been named as defendants in two putative class actions challenging the merger between us and Envestnet in the Court of Chancery
of the State of Delaware. The complaints allege, among other things, that our board of directors breached its fiduciary duties
by agreeing to sell us through a conflicted process and by failing to ensure that our stockholders received adequate and fair value
for their shares. The plaintiff seeks as relief, among other things, an injunction against the merger, rescission of the merger
agreement to the extent it is already implemented, an award of damages and attorneys’ fees. For additional information concerning
the lawsuit, see Item 1, “Legal Proceedings” in this Quarterly Report on Form 10-Q.
If regulatory or judicial proceedings or investigations were to be initiated
against us by private or governmental entities, our business, operating results and financial condition could be adversely affected.
Adverse publicity that may be associated with regulatory or judicial proceedings or investigations could negatively impact our
relationships with our customers and decrease acceptance and use of our solutions.
We have experienced rapid growth in recent periods. If we fail to manage our growth
effectively, we may be unable to execute our business plan or maintain high levels of service and our financial results could be
negatively impacted.
We have increased our number of full-time employees to 1,082 at September
30, 2015 from 969 at December 31, 2014 and have increased our revenue to $79.1 million in the nine months ended September
30, 2015 from $64.2 million in the nine months ended September 30, 2014. Our recent growth and expansion has placed, and our
anticipated growth may continue to place, a significant strain on our managerial, administrative, operational, financial and other
resources. We intend to continue to expand our overall business, customer base, headcount and operations. Expansion creates
new and increased management and training responsibilities for our employees. In addition, continued growth increases the challenges
involved in:
· |
recruiting, training and retaining sufficient skilled technical, marketing, sales and management personnel, in particular in our India location; |
· |
preserving our culture, values and entrepreneurial environment; |
· |
successfully expanding the range of solutions offered to our customers; |
· |
developing and improving our internal administrative infrastructure, particularly our financial, operational, compliance, recordkeeping, communications and other internal systems; |
· |
managing our international operations and the risks associated therewith; |
· |
supporting a potentially broad pool of third-party developers who may use our open platform; |
· |
maintaining high levels of satisfaction with our solutions among our customers; and |
· |
effectively managing expenses related to any future growth. |
If we fail to manage our growth effectively, we may be unable to execute
our business plan or maintain high levels of service for our customers. In addition, if we are unable to manage our expenses related
to growth effectively in the future, our gross margins or operating expenses may be negatively impacted in any particular quarter.
Acquisition activity involving our customers could adversely affect our business.
Acquisitions or similar transactions involving our customers, including
financial institutions, could negatively affect our business in a number of ways. After such a transaction, the acquirer might
terminate, not renew or seek to renegotiate the economic terms of its contract with us. Companies involved in these transactions
may experience integration difficulties that could increase the risk of providing us inaccurate or untimely data or delay deployment
of our solutions. Any of our existing customers may be acquired by an organization with no relationship with us, effectively terminating
our relationship, or be acquired by an organization that already has online personal financial management and payment solutions
integrated into its systems, or that offers competing services to ours, which might cause us to lose business and harm our revenue,
operating results or financial condition.
Future acquisitions or investments could disrupt our business and harm our financial
condition.
As part of our business strategy, we may pursue acquisitions or investments
that we believe will help us to achieve our strategic objectives. The process of integrating an acquired business, product or technology
can create unforeseen operating difficulties, expenditures and other challenges such as:
· |
increased regulatory and compliance requirements; |
· |
implementation or remediation of controls, procedures and policies at the acquired company; |
· |
diversion of management time and focus from operation of our then-existing business to acquisition integration challenges; |
· |
coordination of product, sales, marketing and program and systems management functions; |
· |
transition of the acquired company’s customers onto our systems; |
· |
retention of employees from the acquired company; |
· |
integrating employees from the acquired company into our organization; |
· |
integration of the acquired company’s accounting, information management, human resource and other administrative systems and operations generally with ours; |
· |
liability for activities of the acquired company prior to the acquisition, including violations of law, commercial disputes, and tax and other known and unknown liabilities; and |
· |
litigation or other claims in connection with the acquired company, including claims brought by terminated employees, customers, former stockholders or other third parties. |
If we are unable to address these difficulties and challenges or other
problems encountered in connection with any future acquisition or investment, we might not realize the anticipated benefits of
that acquisition or investment, we might incur unanticipated liabilities or we might otherwise suffer harm to our business generally.
To the extent we pay the consideration for any future acquisitions or
investments in cash, the payment would reduce the amount of cash available to us for other purposes. Future acquisitions or investments
could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization
expenses, or impairment charges against goodwill on our balance sheet, any of which could harm our financial condition and negatively
impact our stockholders.
We are a multinational organization faced with increasingly complex tax issues in several
jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.
As a multinational organization, we may be subject to taxation in several
jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes
we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased
tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect
on our liquidity and operating results. In addition, the authorities in these jurisdictions could review our tax returns and impose
additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our
subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material
impact on us and the results of our operations. For example, the taxing authorities of India and other jurisdictions in which we
operate may challenge our methodologies for allocating income and expense under our intercompany arrangements, including our transfer
pricing, or determine that the manner in which we operate our business is not consistent with the manner in which we report our
income to the jurisdictions. If such a disagreement were to occur, and our positions were not sustained, we could be required to
pay additional taxes, interest and penalties, resulting in higher effective tax rates, reduced cash flows and higher expenses.
We may be subject to additional obligations to collect and remit sales tax and other
taxes, and we may be subject to tax liability for past sales, which could adversely harm our business.
State, local and foreign jurisdictions have differing rules and regulations
governing sales, use, value added and other taxes, and these rules and regulations are subject to varying interpretations that
may change over time. In particular, the applicability of such taxes to our subscription cloud-based software platform in various
jurisdictions is unclear. Further, these jurisdictions’ rules regarding tax nexus are complex and vary significantly. As
a result, we could face the possibility of tax assessments and audits, and our liability for these taxes and associated penalties
could exceed our original estimates. A successful assertion that we should be collecting additional sales, use, value added or
other taxes in those jurisdictions where we have not historically done so and do not accrue for such taxes could result in substantial
tax liabilities and related penalties for past sales, discourage customers from purchasing our services or otherwise harm our business
and operating results.
We face exposure to foreign currency exchange rate fluctuations.
We have costs denominated in foreign currencies, primarily the Indian
Rupee, and our revenue is primarily denominated in the U.S. dollar. This exposes us to the risk of fluctuations in foreign currency exchange
rates. Accordingly, changes in exchange rates, and in particular a weakening of the U.S. dollar, would negatively affect our expenses
and other operating results as expressed in U.S. dollars. We manage our exposure to fluctuations in the Indian Rupee by entering
into forward contracts to cover a portion of our projected expenditures paid in the Indian Rupee. These contracts generally have
a term of less than 12 months. The use of such forward contracts, or other hedging activities in which we may engage in the future,
may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over
the limited time the hedges are in place.
If we fail to maintain proper and effective internal controls, our ability to produce
accurate financial statements on a timely basis could be impaired, which could result in a loss of investor confidence in our financial
reports and have an adverse effect on our stock price.
Our management is responsible for establishing and maintaining adequate
internal controls over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting
and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles,
or GAAP. If we are unable to maintain adequate internal controls over financial reporting, we might be unable to report our financial
information on a timely basis and might suffer adverse regulatory consequences or violate stock market listing standards. There
could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our
financial statements. We have in the past and may in the future discover areas of our internal financial and accounting controls
and procedures that need improvement. Our internal controls over financial reporting will not prevent or detect all error and all
fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system will be met. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within our company will be detected. If
we are unable to maintain proper and effective internal controls, we may not be able to produce accurate financial statements on
a timely basis, which could adversely affect our ability to operate our business and could result in regulatory action, and could
require us to restate, our financial statements. Any such restatement could result in a loss of public confidence in the reliability
of our financial statements and sanctions imposed on us by the U.S. Securities and Exchange Commission, or the SEC.
Changes in financial accounting standards or practices may cause adverse, unexpected
financial reporting fluctuations and harm our operating results.
GAAP is subject to interpretation by the Financial Accounting Standards
Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting
standards or practices could harm our operating results and may even affect our reporting of transactions completed before the
change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may
occur in the future. Changes to existing rules or the questioning of current practices may harm our operating results or the way
we conduct our business.
We might not be able to utilize a significant portion of our net operating loss or
other tax credit carryforwards, which could adversely affect our profitability.
As of December 31, 2014, we had federal and state net operating
loss carryforwards of approximately $162.0 million and $90.1 million, respectively. If not utilized, these federal and
state net operating loss carryforwards will begin to expire in 2019 and 2015, respectively.
In addition, under Section 382 of the Internal Revenue Code of
1986, as amended, or the Code, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year
may be limited if we experience an “ownership change”. A Section 382 “ownership change” generally
occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more
than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules might apply
under state tax laws. Future issuances or trading of our stock could cause an “ownership change”. It is possible that
any future ownership change could have a material effect on the use of our net operating loss carryforwards or other tax attributes,
which could adversely affect our profitability.
Natural disasters and other events beyond our control could harm our business.
Natural disasters or other catastrophic events may cause damage or disruption
to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business
operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control.
Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to
deliver our solutions to our customers, and could decrease demand for our solutions. The majority of our research and development
activities, corporate headquarters, information technology systems, and other critical business operations are located in California
and India, both of which areas have experienced major earthquakes in the past. Significant recovery time could be required to resume
operations and our financial condition and operating results could be harmed in the event of a major earthquake or catastrophic
event.
Adverse global economic conditions could harm our business and financial condition.
The onset or continuation of adverse macroeconomic developments could
negatively affect our business and financial condition. Adverse global economic events have caused, and could, in the future, cause
disruptions and volatility in global financial markets and increased rates of default and bankruptcy, and could impact consumer
and small business spending. Challenging economic times could cause potential new customers not to purchase or to delay purchasing
our solutions, and could cause our existing customers to discontinue purchasing or delay upgrades of our existing solutions, thereby
negatively impacting our revenue and future financial results. In addition, a downturn in the banking and finance sector may disproportionately
affect us because a significant portion of our customers operate in that sector. We cannot predict the timing, strength or duration
of any economic slowdown or recovery, whether global, regional or within specific markets. If the conditions of the general economy
or markets in which we operate worsen, our business and our future operating results could be harmed.
Risks Related to Ownership of Our Common Stock
The regulatory compliance requirements of being a public company subject us to increased
costs, and our management has limited experience managing a public company.
As a public company, we incur significant legal, accounting and other
expenses that we did not incur as a private company. The individuals who constitute our management team have limited experience
managing a publicly-traded company, and limited experience complying with the increasingly complex and changing laws pertaining
to public companies. Our management team and other personnel must now devote a substantial amount of time to new compliance initiatives,
and we may not successfully or efficiently manage our continuing transition into a public company. We expect rules and regulations
such as the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Act, and the rules and regulations of our stock
exchange to increase our legal and finance compliance costs and to make some activities more time-consuming and costly.
The Securities Exchange Act of 1934, as amended, requires, among other
things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley
Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial
reporting. We are continuing the costly process of implementing and testing our systems to report our results as a public company,
to continue to manage our growth and to implement internal controls. We are required to implement and maintain various other control
and business systems related to our equity, finance, treasury, information technology, other recordkeeping systems and other operations.
As a result of this implementation and maintenance, management’s attention may be diverted from other business concerns,
which could adversely affect our business. Furthermore, we rely on third-party software and system providers for ensuring our reporting
obligations and effective internal controls, and to the extent these third parties fail to provide adequate service including as
a result of any inability to scale to handle our growth and the imposition of these increased reporting and internal controls and
procedures, we could incur material costs for upgrading or switching systems and our business could be materially affected.
In addition, changing laws, regulations and standards relating to corporate
governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs
and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in
many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance
is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher
costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving
laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion
of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply
with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities
related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may
be adversely affected.
We expect these laws, rules and regulations to also make it more difficult
and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs
to maintain appropriate levels of coverage. These factors could also make it more difficult for us to attract and retain qualified
members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.
As a result of disclosure of information in filings required of a public
company, our business and financial condition is more visible than it was as a private company, which we believe may result in
threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business
and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor,
these claims, and the time and resources necessary to resolve them, could divert the time and resources of our management and adversely
affect our business and operating results.
We are an emerging growth company, and we cannot be certain if the reduced disclosure
requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and may
take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are
not emerging growth companies, including, but not limited to, not being required to comply with auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, reduced financial disclosure obligations, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and any golden parachute payments not previously approved. For as long as we continue to be an emerging
growth company, we intend to take advantage of certain of these exemptions. We cannot predict if investors will find our common
stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result,
there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an emerging
growth company can take advantage of an extended transition period for complying with new or revised accounting standards. However,
we chose to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting
standards on the relevant dates that adoption of such standards is required for non-emerging growth companies. Our decision to
opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
We will remain an emerging growth company until the earliest of (i)
the date on which we qualify as a “large accelerated filer” with at least $700 million of our equity securities held
by non-affiliates as of June 30 of that fiscal year, (ii) the end of the fiscal year in which we have total annual gross revenue
of $1 billion or more during such fiscal year, (iii) the date on which we have issued more than $1 billion in non-convertible debt
in a three-year period, or (iv) December 31, 2019.
Our ability to raise capital in the future may be limited, and our failure to raise
capital when needed could prevent us from executing our growth strategy.
We believe that our existing cash and cash equivalents will be sufficient
to fund our planned capital expenditures and other anticipated cash needs for at least the next 12 months. If our capital resources
are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities or obtain debt
financing. We have not made arrangements to obtain additional financing and there is no assurance that financing, if required,
will be available in amounts or on terms acceptable to us, if at all.
Our share price has been and may continue to be volatile and you may be unable to sell
your shares at or above your purchase price.
Technology stocks have historically experienced high levels of volatility.
The trading price of our common stock has been and is likely to continue to be highly volatile
and subject to wide fluctuations in response to various factors, some of which are beyond our control and may not be related to
our operating performance. Since shares of our common stock were sold in our IPO in October 2014 at a price of $12.00 per share,
the reported high and low sales prices of our common stock have ranged from $8.90 to $17.97 through September 30, 2015. Factors
that may cause the market price of our common stock to fluctuate include:
· |
actual or anticipated fluctuations in our financial condition and operating results; |
· |
changes in the economic performance or market valuations of other companies engaged in providing portfolio management services, investment advice and retirement help; |
· |
loss of a significant amount of existing business; |
· |
actual or anticipated changes in our growth rate relative to our competitors; |
· |
actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rates; |
· |
issuance of new or updated research or reports by securities analysts; |
· |
our announcement of actual results for a fiscal period that are higher or lower than projected results or our announcement of revenue or earnings guidance that is higher or lower than expected; |
· |
regulatory developments in our target markets affecting us, our customers or our competitors; |
· |
fluctuations in the valuation of companies perceived by investors to be comparable to us; |
· |
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; |
· |
sales or expected sales of additional common stock; |
· |
terrorist attacks or natural disasters or other such events impacting countries where we or our customers have operations; and |
· |
general economic and market conditions. |
Furthermore, the stock markets have experienced extreme price and volume
fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations
often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry
fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international
currency fluctuations, may cause the market price of shares of our common stock to decline. If the market price of shares of our
common stock does not exceed your purchase price, you may not realize any return on your investment in us and may lose some or
all of your investment. In the past, companies that have experienced volatility in the market price of their stock have been subject
to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against
us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously
harm our business.
If securities or industry analysts do not publish research or reports about our business,
or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research
and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us
downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail
to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price
or trading volume to decline.
Our insiders who are significant stockholders may control the election of our board
and may have interests that conflict with those of other stockholders.
A majority of our directors are affiliated with management or our principal
stockholders. In addition, our directors and executive officers and holders of more than five percent of our outstanding shares
of common stock (on an as-converted basis) beneficially owned, in the aggregate, approximately 62% of our outstanding capital stock
as of September 30, 2015. As a result, acting together, this group has the ability to exercise significant control over most matters
requiring our stockholders’ approval, including the election and removal of directors and significant corporate transactions.
The interests of this group may differ from those of other stockholders and they may vote their shares in a way that is contrary
to the way other stockholders vote their shares.
Substantial future sales of our common stock in the public market could cause our stock
price to fall.
Additional sales of our common stock in the public market, or the
perception that these sales could occur, could cause the market price of our common stock to decline. As of September 30,
2015, there were outstanding options and RSUs equivalent to 6,302,798 shares of our common stock that, if exercised, will
result in these additional shares becoming available for sale upon expiration of lock-up agreements and market standoff
agreements. If a substantial number of these shares are sold, the market price of our common stock could be significantly
reduced. Moreover, some holders of shares of common stock have rights, subject to some conditions, to require us to file
registration statements covering the shares they currently hold, or to include these shares in registration statements that
we might file for ourselves or other stockholders.
We filed registration statements on October 3, 2014 and March 4, 2015
to register 7,953,661 and 1,755,831 shares, respectively, of common stock reserved for issuance under our stock plans. If
a large number of these shares are sold, or if it is perceived that they will be sold, in the public market, the trading price
of our common stock could decline.
Management may apply the net proceeds from our IPO to uses that do not increase our
market value or improve our operating results.
We intend to use our net proceeds from our IPO for general corporate
purposes, including as yet undetermined amounts related to working capital and capital expenditures. Our management has considerable
discretion in applying our net proceeds, and you will not have the opportunity, as part of your investment decision, to assess
whether we are using our net proceeds appropriately. Until the net proceeds we received from our IPO are used, they may be placed
in investments that do not produce income or that lose value. We may use our net proceeds from our IPO for purposes that do not
result in any increase in our operating results, which could cause the price of our common stock to decline.
We do not currently intend to pay dividends on our common stock, and consequently,
your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our common stock
and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to
fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future, and the
success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee
that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their
shares.
Delaware law and our corporate charter and bylaws contain anti-takeover provisions
that could delay or discourage takeover attempts that stockholders may consider favorable.
Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing a change of control or changes in our management. These provisions include the following:
· |
the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors; |
· |
the classification of our board of directors so that only a portion of our directors are elected each year, with each director serving a three-year term; |
· |
the requirement for advance notice for nominations for election to the board of directors or for proposing matters that can be acted upon at a stockholders’ meeting; |
· |
the ability of the board of directors to alter our bylaws without obtaining stockholder approval; |
· |
the ability of the board of directors to issue, without stockholder approval, up to 5,000,000 shares of preferred stock with rights set by the board of directors, which rights could be senior to those of common stock; |
· |
the required approval of holders of at least two-thirds of the outstanding shares of common stock to amend specified provisions of our bylaws and certificate of incorporation; and |
· |
the elimination of the right of stockholders to call a special meeting of stockholders and to take action by written consent. |
In addition, we are governed by the provisions of Section 203 of the
Delaware General Corporation Law. These provisions may prohibit or restrict large stockholders, in particular, those owning 15%
or more of our outstanding voting stock, from merging or combining with us. These provisions in our certificate of incorporation
and bylaws and under Delaware law could discourage potential takeover attempts and could reduce the price that investors might
be willing to pay for shares of our common stock in the future and result in our market price being lower than it would without
these provisions.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
See the Exhibit Index following the signature page to this Quarterly
Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.
Exhibit index
Exhibit |
|
|
|
Incorporated by reference herein |
number |
|
Description |
|
Form |
|
Date |
|
|
|
|
|
|
|
2.1 |
|
Agreement and Plan of Merger, dated as of August 10, 2015, by and among Yodlee, Inc., Yale Merger Corp. and Envestnet, Inc. |
|
8-K |
|
August 10, 2015 |
|
|
|
|
|
|
|
3.1 |
|
Amendment to the Amended and Restated Bylaws of Yodlee, Inc., effective as of August 10, 2015. |
|
8-K |
|
August 10, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
Certification of Principal Executive Officer Required Under Rule 13a- 14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. |
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
Certification of Principal Financial Officer Required Under Rule 13a- 14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. |
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. |
|
|
|
|
|
|
|
|
|
|
|
99.1 |
|
Voting Agreement, dated as of August 10, 2015, by and among Envestnet, Inc., Warburg Pincus Private Equity VIII, L.P., Warburg Pincus Netherlands Private Equity VIII C.V. I and WP-WP VIII Investors, L.P. |
|
8-K |
|
August 10, 2015 |
|
|
|
|
|
|
|
101.INS† |
|
XBRL Instance Document |
|
|
|
|
|
|
|
|
|
|
|
101.SCH† |
|
XBRL Taxonomy Schema Linkbase Document |
|
|
|
|
|
|
|
|
|
|
|
101.CAL† |
|
XBRL Taxonomy Calculation Linkbase Document |
|
|
|
|
|
|
|
|
|
|
|
101.DEF† |
|
XBRL Taxonomy Definition Linkbase Document |
|
|
|
|
|
|
|
|
|
|
|
101.LAB† |
|
XBRL Taxonomy Labels Linkbase Document |
|
|
|
|
|
|
|
|
|
|
|
101.PRE† |
|
XBRL Taxonomy Presentation Linkbase Document |
|
|
|
|
† |
In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
Yodlee, Inc. |
|
|
|
(Registrant)
|
Dated: |
November 9, 2015 |
By: |
/s/ ANIL ARORA |
|
|
|
Anil Arora |
|
|
|
Director, President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
Dated: |
November 9, 2015 |
By: |
/s/ MICHAEL ARMSBY |
|
|
|
Michael Armsby |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Accounting and Financial Officer) |
66
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Certification of Principal Executive Officer Required Under Rule 13a-14(a)
and 15d-14(a) of the
Securities Exchange Act of 1934, as amended.
I, Anil Arora, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Yodlee, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee
of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 9, 2015
|
/s/ ANIL ARORA |
|
Anil Arora |
|
Director, President and Chief Executive Officer |
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Certification of Principal Financial Officer Required Under Rule 13a-14(a)
and 15d-14(a) of the
Securities Exchange Act of 1934, as amended.
I, Michael Armsby, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Yodlee, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee
of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 9, 2015
|
/s/ MICHAEL ARMSBY |
|
Michael Armsby |
|
Chief Financial Officer |
|
(Principal Accounting and Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL
FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Anil Arora, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Yodlee, Inc. on Form 10-Q for the fiscal quarter
ended September 30, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial
condition and results of operations of Yodlee, Inc.
Date: November 9, 2015
|
|
|
|
|
By: |
/s/ ANIL ARORA |
|
|
Name: |
Anil Arora |
|
|
Title: |
Director, President and Chief Executive Officer |
|
I, Michael Armsby, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Yodlee, Inc. on Form 10-Q for the fiscal quarter
ended September 30, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial
condition and results of operations of Yodlee, Inc.
Date: November 9, 2015
|
|
|
|
|
By: |
/s/ MICHAEL ARMSBY |
|
|
Name: |
Michael Armsby |
|
|
Title: |
Chief Financial Officer |
|
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