Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Summary of Significant Accounting Policies (Tables)

v3.5.0.2
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
 6 Months Ended
Jun. 30, 2016
Accounting Policies [Abstract]  
Schedule of Segment Reporting Information, by Segment
Segment revenue, expenses and contribution profit for the three and six month periods ended June 30, 2016 and 2015 derived from the Company's Content and Connectivity segments were as follows (in thousands):

 
Three Months Ended June 30,
 
2016
 
2015
 
Content
 
Connectivity
 
Consolidated
 
Content
 
Connectivity
 
Consolidated
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Licensing and services
$
78,710

 
$
27,170

 
$
105,880

 
$
73,814

 
$
24,563

 
$
98,377

Equipment
—

 
6,385

 
6,385

 
—

 
3,999

 
3,999

Total Revenue
78,710

 
33,555

 
112,265

 
73,814

 
28,562

 
102,376

Operating Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of Sales
 
 
 
 
 
 
 
 
 
 
 
Licensing and services
52,940

 
17,195

 
70,135

 
48,047

 
14,378

 
62,425

Equipment
—

 
4,951

 
4,951

 
—

 
3,658

 
3,658

Total cost of sales
52,940

 
22,146

 
75,086

 
48,047

 
18,036

 
66,083

Contribution Profit
25,770

 
11,409

 
37,179

 
25,767

 
10,526

 
36,293

Other Operating Expenses
 
 
 
 
78,982

 
 
 
 
 
35,746

(Loss) Income from Operations
 
 
 
 
$
(41,803
)
 
 
 
 
 
$
547

 
Six Months Ended June 30,
 
2016
 
2015
 
Content
 
Connectivity
 
Consolidated
 
Content
 
Connectivity
 
Consolidated
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Licensing and services
$
162,316

 
$
51,395

 
$
213,711

 
$
145,463

 
$
46,764

 
$
192,227

Equipment
—

 
12,371

 
12,371

 
—

 
10,454

 
10,454

Total revenue
162,316

 
63,766

 
226,082

 
145,463

 
57,218

 
202,681

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
 
 
 
 
 
 
 
 
 
 
 
Licensing and services
108,577

 
32,952

 
141,529

 
98,049

 
28,076

 
126,125

Equipment
—

 
10,325

 
10,325

 
—

 
9,384

 
9,384

Total Cost of sales
108,577

 
43,277

 
151,854

 
98,049

 
37,460

 
135,509

Contribution profit
53,739

 
20,489

 
74,228

 
47,414

 
19,758

 
67,172

Other operating expenses
 
 
 
 
121,024

 
 
 
 
 
70,655

Loss from operations
 
 
 
 
$
(46,796
)
 
 
 
 
 
$
(3,483
)

Schedule of Earnings Per Share, Basic and Diluted
The computation for basic and diluted EPS was as follows (in thousands, except per share data):
    
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
Net (loss) income (numerator):
 
 
 
 
 
 
 
Net (loss) income for basic EPS
$
(38,160
)
 
$
12,987

 
$
(40,572
)
 
$
9,556

 
 
 
 
 
 
 
 
Less: adjustment for change in fair value on warrants liability for diluted EPS after assumed exercise of warrants liability
—

 
14,789

 
—

 
15,743

Net loss for dilutive EPS
$
(38,160
)
 
$
(1,802
)
 
$
(40,572
)
 
$
(6,187
)
 
 
 
 
 
 
 
 
Shares (denominator):
 
 
 
 
 
 
 
Weighted-average shares for basic EPS
78,127

 
77,111

 
78,385

 
76,993

Effect of assumed exercise of warrants liability
—

 
1,407

 
—

 
1,630

Adjusted weighted-average share for diluted EPS
78,127

 
78,518

 
78,385

 
78,623

 
 
 
 
 
 
 
 
Basic (loss) income per share
$
(0.49
)
 
$
0.17

 
$
(0.52
)
 
$
0.12

Diluted loss per share
$
(0.49
)
 
$
(0.02
)
 
$
(0.52
)
 
$
(0.08
)
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
Securities not included in the calculation of diluted (loss) income per share were as follows (in thousands):

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Employee stock options
6,139

 
3,234

 
5,919

 
2,926

Restricted stock units
602

 
51

 
397

 
36

Non-employee stock options
—

 
1

 
—

 
3

Equity warrants (1)
1,164

 
489

 
1,165

 
513

Liability warrants (2)
6,173

 
—

 
6,173

 
—

Convertible notes
4,447

 
4,447

 
4,447

 
3,261


(1) Legacy Row 44 warrants originally issuable for Row 44 common stock and Row 44 Series C preferred stock.
(2) Warrants issued in our initial public offering to non-sponsor shareholders ("Public SPAC Warrants").
Fair Value Measurements, Recurring and Nonrecurring
The following tables summarize the Company's financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2016, and December 31, 2015, respectively (in thousands):

 
June 30, 2016
 
Quotes Prices in Active Markets (Level 1)
 
 Significant Other Observable Inputs (Level 2)
 
 Significant Other Unobservable Inputs (Level 3)
Earn-out liability (1)
$
6,565

 
$
—

 
$
—

 
$
6,565

Public SPAC Warrants (2)
7,284

 
7,284

 
—

 
—

Total financial liabilities
$
13,849

 
$
7,284

 
$
—

 
$
6,565



 
December 31, 2015
 
Quotes Prices in Active Markets (Level 1)
 
 Significant Other Observable Inputs (Level 2)
 
 Significant Other Unobservable Inputs (Level 3)
Earn-out liability (1)
$
9,652

 
$
—

 
$
—

 
$
9,652

Public SPAC Warrants (2)
24,076

 
24,076

 
—

 
—

Total financial liabilities
$
33,728

 
$
24,076

 
$
—

 
$
9,652


(1) Includes $6.6 million and $9.7 million as of June 30, 2016 and December 31, 2015, respectively, of earn-out liability for the Company's acquisitions of Western Outdoor Interactive Pvt. Ltd. ("WOI"), certain assets of RMG Networks Holding Corporation (the "RMG Assets"), navAero AB ("navAero") and Marks Systems, Inc. (doing business as masFlight ("masFlight")) assumed in business combinations for the year ended December 31, 2015.
(2) Includes 6,173,228 warrants issued in our initial public offering to non-sponsor shareholders.
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation
The following table presents the fair value roll-forward reconciliation of level 3 assets and liabilities measured at fair value basis for the six months ended June 30, 2016 (in thousands):

 
Earn-Out Liability
Balance, December 31, 2015
$
9,652

  Change in value
(3,087
)
Balance, June 30, 2016
$
6,565

Fair Value, by Balance Sheet Grouping
The following table shows both the carrying amounts, which approximate the fair values, of the Company's financial liabilities in the condensed consolidated financial statements at June 30, 2016 and December 31, 2015, respectively (in thousands):

 
June 30, 2016
 
December 31, 2015
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Financial liabilities:
 
 
 
 
 
 
 
Convertible senior notes (1)
$
68,679

 
$
61,104

 
$
68,335

 
$
78,557

Notes payable
$
1,781

 
$
1,781

 
$
2,229

 
$
2,229

(1) The fair value of the convertible senior notes is exclusive of the conversion feature, which was originally allocated for reporting purposes at $13.0 million, and is included in the condensed consolidated balance sheets within "Additional paid-in capital" (see Note 11).
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]
The table below shows the effect of the reclassification of unamortized debt issuance costs associated with our convertible senior notes in our previously reported consolidated balance sheet as of December 31, 2015 (in thousands):
    
 
As presented December 31, 2015
 
Reclassifications
 
As adjusted December 31, 2015
Other non-current assets
$
13,702

 
$
(1,678
)
 
$
12,024

Notes payable and accrued interest, non-current
71,493

 
(1,678
)
 
69,815