United states securities and exchange commission

 

47

 

Sales and marketing expenses increased $18.1 million for the year ended December 31, 2015 primarily due to an increase in employee-related costs and sales commissions, expansion of marketing programs to new internation al and corporate markets, travel, overhead, and information technology expenses. Employee-related costs and sales commissions increased $11.8 million as a result of the hiring of additional employees and growth in our customer base. Marketing program costs increased $3.3 million as we launched Bridge in February 2015, expanded into international markets, and increased attendance at InstructureCon, our annual user conference. Travel and other costs increased $1.6 million as we continued to expand our sales a nd marketing organization to grow our customer base. Allocated overhead expenses increased $0.9 million primarily due to higher rent expense and the depreciation of capital equipment. Information technology expenses increased $0.8 million as we continue to automate our internal systems. These increases were offset by a decrease in outside contractor costs of $0.3 million.

Research and Development

 

		Year Ended December 31,								Change
		2015				2014				Amount				%
		(dollars in thousands)
Research and development		$	24,151			$	21,290			$	2,861				13	%

 

Research and development expenses increased $2.9 million for the year ended December 31, 2015 primarily due to an increase in employee-related costs of $2.6 million and information technology expenses and allocations of $0.3, as we continue to grow our engineering organization to develop new applications and continue to develop additional features for Canvas and Bridge.

General and Administrative

 

		Year Ended December 31,								Change
		2015				2014				Amount				%
		(dollars in thousands)
General and administrative		$	23,482			$	11,268			$	12,214				108	%

 

General and administrative expenses increased $12.2 million for the year ended December 31, 2015 primarily due to an increase in employee-related costs, including stock-based compensation, information technology, travel and other expenses, third-party services and overhead allocations. Stock-based compensation increased $5.2 million as a result of a non-cash expense associated with the purchase by an investor of common stock from current and former employees at a premium over fair value. Employee-related costs increased $5.3 million as a result of the recruiting and hiring of additional employees. Our information technology expenses increased $0.7 million as we continued to automate our internal systems. Travel expenses increased $0.2 million primarily due to our continued growth and international expansion. Third-party services increased $0.4 million due to tax and legal costs relating to our international expansion. Allocated overhead expenses and other insignificant items increased $0.4 million primarily due to higher rent expense and the depreciation of capital equipment.

Other Income (Expense)

 

		Year Ended December 31,								Change
		2015				2014				Amount				%
		(dollars in thousands)
Other expense, net		$	(889	)		$	(2,661	)		$	1,772				(67	)%

 

Other expense, net includes interest income and expense, the change in fair value of warrant liability and the impact of foreign currency transaction gains and losses. Other expense decreased $1.8 million for the year ended December 31, 2015 as the change in fair value of warrant liability decreased due to the exercise of the redeemable convertible preferred stock warrants in February 2015. The decrease in the change in fair value of warrant liability was offset by an increase in net foreign currency transaction losses.

48

 

Liquidity and Capital Resources

As of December 31, 2016, we had $44.5 million of cash and cash equivalents and $23.9 million in short-term marketable securities. We believe our cash and cash equivalents, short-term marketable securities, cash flows from operations and available borrowings under our credit facility will be sufficient to support our planned operations for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, net revenue retention rates, the timing and extent of spending to support the expansion of sales and marketing and research and development activities, the introduction of new and enhanced offerings, and the continuing market acceptance of our platform. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, and intellectual property rights. We may be required to seek additional equity or debt financing. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition may be adversely affected.

In June 2015, we entered into an amended and restated loan and security agreement, or credit facility, with Silicon Valley Bank, or SVB. The agreement provides for up to $15.0 million in revolving borrowings (subject to increase to $25.0 million in the lender’s sole discretion). Availability is subject to a formula based on our monthly recurring revenue. Advances under the credit facility accrue interest at a floating per year rate equal to the prime rate plus 0.5%. The credit facility terminates in June 2017, at which time the principal amount of all outstanding advances becomes due and payable. We are obligated to pay a fee equal to 0.25% per year, payable quarterly in respect of any unused borrowing capacity under the credit facility. As of December 31, 2016, we did not have any outstanding borrowing under the credit facility.

To secure our obligations under the credit facility, we granted SVB a security interest in substantially all of our tangible and intangible assets, excluding intellectual property. The credit facility contains customary events of default, conditions to borrowing, and covenants, including restrictions on our ability to dispose of assets, make acquisitions, incur debt, incur liens and make distributions and dividends to stockholders. The agreement also includes a financial covenant requiring the achievement of minimum bookings on a trailing three month basis, tested monthly. During the continuance of an event of default, SVB may accelerate amounts outstanding, terminate the credit facility and foreclose on the collateral. As of December 31, 2016, we were in compliance with all covenants under the terms of the credit facility.

The following table shows our cash flows for 2016, 2015 and 2014:

 

		Year Ended December 31,
		2016				2015				2014
		(in thousands)
Net cash used in operating activities		$	(21,608	)		$	(19,351	)		$	(20,395	)
Net cash (used in) provided by investing activities			(31,306	)			(6,469	)			10,003
Net cash provided by financing activities			6,982				72,376				41,169