Table of Contents
UNITED
STATES
SECURI
TIES
AND
EXCHANGE
COMMISSION
Washington,
D.C.
20549
FORM
10-K
(Mark
One)
☒
☐
ANNUAL
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
For
the
fiscal
year
ended
December
31,
2015
O
r
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
001-36471
MobileIron,
Inc.
(Exact
name
of
registrant
as
specified
in
its
charter)
Delaware
(State
or
other
jurisdiction
of
incorporation
or
organization)
26-0866846
(I.R.S.
Employer
Identification
Number)
415
East
Middlefield
Road
Mountain
View,
CA
94043
(650)
919-8100
Securities
registered
pursuant
to
Section
12(b)
of
the
Act:
Title
of
each
class
Common Stock, par value $0.0001 per share
Name
of
each
exchange
on
which
registered
The NASDAQ Global Select Market
Securities
registered
pursuant
to
Section
12(g)
of
the
Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”).
Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 ☒ 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 ☒ No ☐
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
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 definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
☐
☐
(Do not check if a smaller reporting company)
Smaller reporting company
Accelerated filer
☒
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 1 2b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2015, the aggregate market value of shares of common stock held by non-affiliates of the registrant was $233 million based on the number of shares held by non-affiliates as of June 30, 2015
and based on the closing sale price of the registrant's common stock as reported on the NASDAQ Stock Market on June 30, 2015 of $5.91 per share. Shares of common stock held by officers, directors and holders of
more than 5% of the outstanding common stock have been excluded from this calculation because such person may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
The number of outstanding shares of the registrant’s common stock was 82,398,716 as of February 19, 2016.
DOCUMENTS
INCORPORATED
BY
REFERENCE
Portions of the information called for by Part III of this Annual Report on Form 10-K, to the extent not set forth herein, are hereby incorporated by reference from registrant’s definitive proxy statement for
the 2016 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2015.
Table of Contents
Item 1. Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine and Safety Disclosures
Table
of
Contents
PART
I
PART
II
Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
PART
III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART
IV
Item 15.
Exhibits and Financial Statement Schedules
Signatures
Exhibit Index
“MobileIron,” the MobileIron logos and other trademark or service marks of MobileIron, Inc. appearing
in this Annual Report on Form 10-K are the property of MobileIron, Inc. Trade names, trademarks and
service marks of other companies appearing in this report are the property of their respective holders.
2
Page
No.
4
12
36
36
36
36
37
40
43
67
69
98
98
100
101
101
101
101
101
102
103
105
Table of Contents
SPECIAL
NOTE
REGARDING
FORWARD
LOOKING
STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. In some cases you can identify these statements by forward-looking words such as “believe,”
“may,” “will,” “might,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “should,” “would,” “project,”
“potentially,” “predict,” “plan,” “outlook,” “target,” “expect,” or similar expressions, or the negative or plural of these words
or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
·
·
·
·
·
·
·
·
·
·
·
·
beliefs and objectives for future operations;
our business plan and our ability to effectively manage our growth and associated investments;
our ability to timely and effectively scale and adapt our existing technology;
our ability to innovate new products and bring them to market in a timely manner;
our ability to expand internationally;
our ability to attract new customers and further penetrate our existing customer base;
our expectations concerning renewal rates for subscriptions and services by existing customers;
cost of revenue, including changes in costs associated with hardware, royalties, customer support, and data center
operations;
operating expenses, including changes in research and development, sales and marketing, and general and
administrative expenses;
our expectations concerning relationships with third parties, including channel partners and logistics providers;
economic and industry trends or trend analysis; and
the sufficiency of our existing cash and investments to meet our cash needs for at least the next 12 months.
These forward-looking statements are based on current expectations and assumptions that are subject to risks and
uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements.
These risks are not exhaustive. These statements are within the meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. These statements appear throughout this Form 10-K and are statements regarding our intent,
belief, or current expectations, primarily with respect to our business and related industry developments. You should not place
undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-K. Our actual results could
differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us and
described in Part I, Item 1A, entitled “Risk Factors,” and in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in this Form 10-K. We undertake no obligation to update any forward-looking
statements for any reason to conform these statements to actual results or to changes in our expectations.
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Item
1.
Business
Overview
We invented a purpose-built mobile IT platform for enterprises to secure and manage mobile applications, or apps, content
and devices while providing their employees with device choice, privacy and a native user experience. Customers use our
platform as the technology foundation in their journey to become “Mobile First” organizations, embracing mobility as a primary
computing platform for their employees. Mobile First organizations transform their businesses by giving their employees secure
access to critical business applications and content on devices employees want with a native user experience they love. Our
platform is extensible and fosters a growing ecosystem of application developers and technology partners who augment the
functionality and add value to our platform, creating positive network effects for our customers, our ecosystem and our company.
The adoption of mobile technology is a disruption of historic proportions and has outpaced earlier transitions such as
mainframe to PCs and client/server to the Internet. IT departments are often challenged to provide users with the benefits of
mobility, while simultaneously satisfying enterprise security and compliance requirements. In modern end-user computing,
operating systems such as Android, iOS, and Windows have a sandboxed architecture to isolate data at the app level and protect
both the file system and the operating system from unauthorized access. New laptop and desktop operating systems are being
built based on this architecture. As a result, the security and management model for these operating systems is very different from
what was needed in the legacy PC model and companies need new security technology while maintaining device choice and
privacy. This new security model is called Enterprise Mobility Management (EMM). We believe that only with an EMM
platform can an enterprise deal with the new threat landscape while maintaining user privacy and native experience.
IT organizations are increasingly consolidating their PC and mobile device support groups and treating their devices as
"endpoints." Meanwhile, the PC and mobile architectures continue to fuse together, blurring the boundaries between the EMM
and client management tool capabilities. (Source: Gartner “Magic Quadrant for Enterprise Mobility Management Suites” by
Terrence Cosgrove, Rob Smith, Chris Silva, John Girard, Bryan Taylor, June 8, 2015 . )
Our platform is the security and apps backbone for modern end-user computing and enables all phases of customers’
journeys to become Mobile First organizations. Employees get the apps and content that they need to get their jobs done on the
mobile device of their choice while preserving the native device experience. Enterprise IT departments get a security and
management platform that easily integrates into their existing IT or cloud infrastructure and allows them to protect and manage
corporate data and apps, independent of the mobile device, for both corporate-owned, bring your own device, or BYOD, and
mixed device ownership environments.
Our business model is based on winning new customers, expanding sales within existing customers, upselling new products
and renewing subscriptions and software support agreements. We win customers using a sales force that works closely with our
channel partners, including resellers, service providers and system integrators. We have experienced rapid growth in our customer
base, having sold our platform to over 10,500 customers since 2009. Our strategy is to enhance the value of our platform by
introducing additional products and upselling these additional products to our customers. Our global customer support team is
focused on enabling successful customers, which is designed to lead to additional sales and renewals of subscription and software
support agreements. In 2015, we generated over half of our gross billings from recurring sources. Our renewal rates, which are
determined on a device basis for software support and subscription agreements, exceeded 90% in 2015.
We offer our customers the flexibility to use our software as a cloud service or to deploy it on premise. They can also
choose from various pricing options including subscription and perpetual licensing. We primarily target large customers across a
broad range of industries including financial services, government, healthcare, legal, manufacturing, professional services, retail,
technology and telecommunications. Customers choose MobileIron because we deliver the scalability and security for apps and
data that they need to become Mobile First. As of December 31, 2015, our customers included over 500 companies on the Forbes
Global 2000 Leading Companies list for 2015. No single end user accounted for more than 5% of our total revenu e in 2015, one
reseller accounted for 16% of our revenue in 2015.
The
MobileIron
Platform
and
Services
Our platform is composed of three integrated and distributed software components: a mobile IT policy server, or Core, that
allows IT departments to define security and device management policies across popular mobile operating systems; software on
the device, or Client, to enforce those policies at the mobile end-point; and an in-line intelligent
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gateway, or Sentry, that secures data as it moves between the device and back-end enterprise systems. The three components of
the MobileIron platform work together to ensure end-to-end security for enterprise data by enforcing IT policies defined in Core
on the data-at-rest via Client and data-in-motion with Sentry. Our platform utilizes FIPS 140-2 cryptographic modules, which are
required by government agencies and are desirable for highly regulated and security conscious customers.
Our platform enables four main areas of functionality:
· Mobile Device Management (MDM). Our MDM capabilities enable IT to securely manage mobile devices across
mobile operating systems and provide secure corporate email, automatic device configuration and certificate-based
security. For end-users the MobileIron client creates a clear separation between personal and business information.
This allows IT to selectively wipe only the corporate data on the device should the user leave the company or should
the device fall out of compliance, or be lost.
· Mobile Application Management (MAM). Our MAM functionality helps IT manage the entire apps lifecycle, from
making apps available in the enterprise app storefront, securing applications on the device, enforcing user
authentication, isolating them from personal apps and retiring them as necessary. On the device, the Client works with
Core to install the enterprise app storefront so that users can browse and install the mobile applications made available
to them by their company. Enterprise app data is secure and can only be exchanged between applications that are part
of the MobileIron container.
· Mobile Content Management (MCM). Our MCM functionality enables IT to provide secure mobile access to
enterprise documents residing in SharePoint, file shares and other enterprise and cloud content repositories. It also
secures email attachments so that they are encrypted and can only be viewed with the secure MobileIron Viewer or
any other enterprise application managed by MobileIron. Our secure web browser enables users to securely access
corporate intranet and HTML apps without requiring a virtual private network, or VPN, client on the device.
·
Advanced Security Services. Our advanced mobile security services include enhanced VPN functions, which allows
mobile apps to access enterprise resources through a secure application communication channel, eliminating the need
for device-wide VPN; Single Sign-On, which gives access to multiple enterprise apps with a single authentication; and
Help@Work, which mirrors the user’s screen onto the IT management console so that IT support personnel can better
help the user resolve an issue; and integrations with leading third-party analytics, compliance, and service-
provisioning platforms.
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Platform
Extensibility
and
Ecosystem
We have invested, and intend to continue to invest, in expanding the breadth and depth of our mobile IT ecosystem. Our
platform is extensible on both the client side and server side. Customers, application vendors and technology vendors can
leverage our technology to add value to our platform, and in turn, mobilize and secure their products, apps and content. As of
December 31, 2015, over 180 technology integrations were released by our ecosystem partners. These integrations cover both
user apps and back-end IT infrastructure.
On the client side, MobileIron AppConnect allows application vendors and customers to build apps that can be secured and
managed by MobileIron. Once integrated, these applications become part of the secure container on the device managed by the
Client, which configures the apps, secures their data while on the device, ensures that corporate data can only be shared between
secure applications, authenticates the user with a single pin or password, and if need be, removes the applications from the device.
AppConnect-enabled applications can also leverage secure Sentry tunnels to exchange information with enterprise back-end
systems.
On the server side, we work with leading technology companies through our ServiceConnect program. These partners use
the MobileIron platform APIs to enrich the features and functionality of their products with mobile IT capabilities. When
combined, the common solutions provide increased security, better user experience, and business visibility through analytics. For
example, network security vendors can use our security status information in order to make real time decisions about whether a
mobile device should be granted access to secure corporate service. Application Reputation vendors can use our system in order
to detect the presence of new apps and identify potentially harmful apps, so that IT departments can remediate as necessary.
Leading data analytics providers can use the data we collect on devices in order to help IT department make better choices.
Our
Competitive
Strengths
We pioneered many of the innovations in the mobile IT landscape. We differentiate ourselves from our competitors through the
following strengths:
· Comprehensive Solution for the Transition to a Mobile First Organization. We believe that most organizations are at
some stage along a phased adoption of mobile technology and will require a mobile IT platform to successfully leverage
the benefits of mobility. Our platform can be adopted in stages to support the Mobile First journey of an organization,
from device security and secure email delivery to managed content and applications.
·
·
Platform Architected for Mobile IT. Our mobile IT platform was purpose-built to address the rapidly-evolving and
complex mobile requirements of users, IT and the mobile IT ecosystem, unlike others who have repurposed their
products to retrofit them with mobile capabilities. We believe the pace of change in our market is unprecedented, driven
by the rapid evolution of mobile operating systems such as iOS, Android, and Windows. We believe by being
independent and focused on this market, we provide a higher level of service, faster innovation, and differentiated
products to our customers.
Enterprise Class Security. We continue to invest in providing enterprise class security for our customers. Our platform
secures enterprise data on the device and data traveling between the device and back-end enterprise systems. It utilizes
FIPS 140-2 cryptographic modules, which are required by government agencies and are desirable for highly regulated
and security conscious customers. We have successfully deployed to customers in some of the most security conscience
enterprise environments in industry verticals such as government, financial services, and health-care.
· Network Effects of our Platform. Our platform benefits from positive network effects that are the result of the strength of
our ecosystem. Our ecosystem includes applications developed by customers and third-parties that incorporate our
technology and integrated infrastructure solutions . Platform effects include our ecosystem partners accelerating enterp
rise adoption of their products , and customers choosing our platform because of our ecosystem of partners .
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·
Application Management. Our end-to-end solution to secure and manage mobile apps enables our customers to move
beyond secure email and mobilize other core business processes, therefore getting the next level of return on their mobile
investments.
· World Class Global Customer Success Organization. We believe that our customers’ success with their mobility
initiatives will drive rapid expansion of their mobile IT infrastructure and in turn grow our business. Our global
Customer Success organization provides global technology support, implementation and best practices toolkits,
education and online training, as well as strategic account management to build trusted customer relationships. We seek
to build mobile industry expertise throughout the IT community by offering MobileIron certification programs to our
customers and partners to help educate, train and certify individuals who work with our products and services.
· Our Channel-Focused Sales Model with Global Reach. We have a strong global network of channel partners that drive
customer and sales growth across all customer segments. We work with diverse channel partners to maximize global
sales reach and provide efficient customer service.
·
Flexible Deployment and Pricing Model. We offer our customers the choice of using our platform either as a cloud
service or deployed on premise. We offer pricing flexibility with subscription or perpetual licensing options, which
allows a customer to pay for our platform through either its capital or operating budget.
Customers
Our customers include leading enterprises in a broad range of industries, including financial services, government,
healthcare, legal, manufacturing, professional services, retail, technology and telecommunications. No single industry verticals
accounted for more than 20% of our gross billings in the three year period ended 2015. Medium to large enterprises accounted for
a majority of our gross billings. We have sold our products to over 10,500 customers globally, including more than 500
companies on the Forbes Global 2000 Leading Companies list, as of December 31, 2015 . Our channel partners include resellers,
service providers and system integrators. AT&T, Inc., as a reseller, accounted for approximately 16% , 20% and 20% of our total
revenue in 2015, 2014 and 2013 , respectively. No end user of our products accounted for more than 5% of our total revenue in
2015, 2014, or 2013.
Backlog
As is typical in the software industry, we expect a significant portion of our software license orders to be received in the last
month of each quarter. We do not believe that our backlog at any particular time is meaningful because it has historically been
immaterial relative to our total revenue and is not necessarily indicative of future revenue in any given period .
Sales
and
Marketing
We sell the vast majority of our products through indirect sales channels and maintain a sales force that works closely with
our channel partners to develop sales opportunities. We have an outside sales force focused on large organizations, inside sales
teams focused on mid-sized enterprises, and teams that work with service providers that focus on small to medium sized
businesses.
Our sales organization is supported by sales engineers with deep technical expertise and responsibility for pre-sales
technical support and technical training of our channel partners. The sales organization has strong alignment with our Customer
Success teams and acts as a liaison between the IT customers and the marketing and product development organizations,
especially during the pre-sales phase. We believe this approach allows us to leverage the benefits our sales channel and maintain
communication with our customers. Our sales cycle ranges from a few weeks for smaller organizations to many months for large
enterprises.
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Channel
Program
We work with mobile-focused channel partners who sell our platform to customers. We focus on building in-depth
relationships with a number of solutions-oriented partners that have strong industry expertise. These channel partners include both
traditional IT resellers as well as service providers. We operate a formal accreditation program for the sales and technical
professionals of our channel partners.
Marketing
Our marketing efforts are focused on building our brand reputation and market awareness of our platform, driving customer
demand and operating our channel program. The marketing team consists primarily of product marketing, programs marketing,
field marketing, channel marketing and public relations functions. Marketing activities include demand generation, advertising,
managing the corporate website and partner portal, trade shows and user conferences, industry and channel events, product
education and leadership content, press and analyst relations and customer awareness. In addition, we sponsor the publication of
major market research and provide industry analysis. These activities and tools are available to our channel partners.
We also host our annual Mobile First user conference, and webinars where customers and partners both participate in and
present a variety of programs designed to help accelerate the adoption and advanced use of our services and platform. We are
investing in marketing, sales, and channel automation tools to achieve efficiencies in our marketing efforts.
Research
and
Development
We have invested significant time and financial resources in the development of our platform and believe that continued
research and development is critical to our ongoing success. Research and development investments drive innovation, enterprise
class mobile IT platform features and keep pace with the rapidly evolving mobile operating system and device ecosystem.
We believe that innovation and timely development of new features and products are essential to meeting the needs of our
customers and channel partners and improving our competitive position. The distributed nature of our platform enables
enterprise-class scalability and high performance to allow customers to integrate it seamlessly regardless of the complexity of
their existing infrastructure.
Research and development expense totaled $61.9 million, $46.3 million and $36.4 million in 2015, 2014 and 2013 ,
respectively. We plan to continue to significantly invest in resources to conduct our research and development efforts.
Competition
We operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the
devices, operating systems, applications and technology landscape result in evolving customer requirements.
Our competitors fall into three primary categories:
·
·
·
diversified technology companies such as Microsoft and IBM;
providers of EMM solutions such as BlackBerry, Citrix and VMware; and
small and large companies that offer point solutions that compete with some of the features present in our mobile IT
platform.
The principal competitive factors in our market include:
·
·
product features, reliability, performance and effectiveness;
price and total cost of ownership;
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·
·
·
depth of customer relationships;
product extensibility and ability to integrate with other technology infrastructures;
customer choice of flexibility between cloud service or on premise deployment;
· mobile IT expertise and focus;
·
·
·
·
channel depth and breadth;
strength of sales and marketing efforts;
brand awareness and reputation; and
focus on customer service and success.
We believe we generally compete favorably with our competitors on the basis of these factors as a result of our
commitment to the native OS experience, our OS neutrality, our focus on EMM, our ecosystem of partners, the architecture,
features, and performance of our platform, the ease of integration of our platform with other technology infrastructures, our
mobile IT expertise and our commitment to customer success. Many of our competitors have substantially greater financial,
technical and other resources, greater name recognition, larger sales and marketing budgets, broader distribution and more
entrenched relationships with enterprise customers and prospects. For more information about the competitive risks we face, refer
to Item 1A. “Risk Factors” included elsewhere in this Annual Report.
Intellectual
Property
We protect our core technology and intellectual property by relying on federal, state, common law and international
intellectual property rights, including patents, trade secrets, copyrights and trademarks. We also rely on confidentiality and
contractual restrictions, including confidentiality and invention assignment agreements with our employees and contractors and
confidentiality agreements with third parties.
We pursue registration of our patents, trademarks and domain names in the United States and certain locations outside the
United States. We actively seek patent protection covering inventions originating from the Company and acquire patents we
believe may be useful or relevant to our business. As of December 31, 2015 , we owned 26 patents worldwide covering various
innovations of our modern EMM technology.
Circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual
property protection may not be available outside the United States. Also, the efforts we have taken to protect our proprietary
rights may not be sufficient or effective.
Companies in the mobile and other technology industries or non-practicing entities may own large numbers of patents,
copyrights and trademarks and may frequently request license agreements, threaten litigation or file suit against us based on
allegations of infringement or other violations of intellectual property rights. We have faced, and expect to face in the future, suits
or allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties,
including those of our competitors and non-practicing entities. As we face increasing competition and as our business grows, we
will likely face more claims of infringement.
Employees
As o f December 31, 2015, we had 843 full-time employees, 326 of whom were primarily engaged in research and
development, 288 of whom were primarily engaged in sales and marketing, 137 of whom were primarily engaged in customer
success and 92 of whom were primarily engaged in administration and finance. 30 4 of these employees were located outside of
the United States. In addition, as of December 31, 2015, we had 46 contractors. None of our United States employees are
represented by a labor organization or are party to any collective bargaining arrangement.
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Employees in certain European countries have the benefits of collective bargaining arrangements at the national level. We have
never had a work stoppage, and we consider our relationship with our employees to be good.
Segment
and
Geographic
information
We conduct business globally. Our chief operating decision maker (Chief Executive Officer) reviews financial information
presented on a consolidated basis accompanied by information about revenue by geographic region for purposes of allocating
resources and evaluating financial performance. We have one business activity, and there are no segment managers who are held
accountable for operations, operating results or plans for levels, components or types of products or serv ices below the
consolidated company level. Accordi ngly, we are considered to be a single reportable segment and operating unit structure.
Revenue by geographic region based on the billing address was as follows:
(in thousands)
Revenue
United States
International
Total
Year
ended
December
31,
2014
2015
2013
$ 74,235 $ 72,124 $ 58,656
75,063 60,171 46,918
$ 149,298 $ 132,295 $ 105,574
We have no significant amount of long-lived assets in count ries outside the United States.
Facilities
Our principal executive offices are located in Mountain View, California and include f ive bui ldings totaling approximately
123 ,000 square feet under leases expiring from March 2016 to April 2023 . We have additional office locations throughout the
United States and in various international locations, including offices in the United Kingdom, Netherlands, Germany, Japan and
India .
We intend to add new facilities and expand our existing facilities as we add employees and grow our business, and we
believe that suitable additional or substitute space will be available on commercially reasonable terms to meet our future needs.
Legal
Proceedings
On November 14, 2012, Good Technology filed a lawsuit against us in federal court in the Northern District of California
alleging false and misleading representations concerning their products and infringement of four patents held by them. In the
complaint, Good Technology sought unspecified damages, attorney’s fees and a permanent injunction. On March 1, 2013, we
counterclaimed against Good Technology for patent infringement of one of our patents, seeking similar relief. On October 13,
2014, the court issued a claims construction order. Good Technology responded by filing additional patent infringement suits
against us in Delaware, the UK and Germany, as well as inter partes review proceedings. In each of these proceedings, Good
Technology sought to invalidate our patents and/or receive injunctive relief, as well as attorney’s fees. We counterclaimed against
Good Technology in the Delaware case on two of our next generation patents and sought relief similar to what Good Technology
was seeking in that case. The Delaware case was transferred to the Northern District of California on March 27, 2015. On June
30, 2015, the court in the original Northern District of California case issued a summary judgment order invalidating the asserted
claims of one of Good Technology’s patents and holding that we did not infringe that patent as a matter of law. On August 4,
2015, a jury in the original Northern District of California case found that two of the three remaining Good Technology patents
that were asserted in the case were invalid and that we did not infringe any of the three patents. The jury also found that while
Good Technology did not infringe our asserted patent, our patent was not invalid. As a result, neither we nor Good Technology
was awarded damages in the case.
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On November 2, 2015, Blackberry announced that it had acquired Good Technology. On December 1, 2015, we and Good
Technology announced a settlement of the global litigation between us, which included a narrow, non-material license agreement
between us and Good Technology and a mutual dismissal of claims.
On May 1, 2015, a purported stockholder class action lawsuit was filed in the United States District Court for the Northern
District of California against the Company and certain of its officers, captioned Panjwani v. MobileIron, Inc., et al. The action is
purportedly brought on behalf of a putative class of all persons who purchased or otherwise acquired the Company’s securities
between February 13, 2015 and April 22, 2015. It asserts claims for violation of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934.The complaint seeks, among other things, compensatory damages and attorney’s fees and costs on behalf
of the putative class. An amended complaint was filed on September 28, 2015. MobileIron filed a motion to dismiss the amended
complaint on November 13, 2015, w hich was granted on February 22, 2016, with leave to amend .
On August 5, 2015, August 21, 2015 and August 24, 2015, purported stockholder class action lawsuits were filed in the
Superior Court of California, Santa Clara County against the Company, certain of its officers, directors, underwriters and
investors, captioned Schneider v. MobileIron, Inc., et al., Kerley v. MobileIron, Inc., et al. and Steinberg v. MobileIron, Inc., et al.
The actions are purportedly brought on behalf of a putative class of all persons who purchased the Company’s securities issued
pursuant or traceable to the Company’s registration statement and the June 12, 2014 initial public offering. The lawsuits assert
claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. The complaints seek among other things,
compensatory damages and attorney’s fees and costs on behalf of the putative class. On January 4, 2016, the three class action
lawsuits were consolidated under the caption, In re MobileIron, Inc. Shareholder Litigation . The Company intends to defend
these lawsuits vigorously.
We continually evaluate uncertainties associated with litigation and record a charge equal to at least the minimum estimated
liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the
financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and (ii) the
loss or range of loss can be reasonably estimated. If we determine that a loss is possible and a range of the loss can be reasonably
estimated, we disclose the range of the possible loss in the Notes to the Consolidated Financial Statements. We evaluate, on a
quarterly basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, if
any, and the matters and related ranges of possible losses disclosed, and make adjustments and changes to our disclosures as
appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss
related to such matters. Until the final resolution of such matters, there may be an exposure to loss, and such amounts could be
material. An estimate of a reasonably possible loss (or a range of loss) cannot be made in our lawsuits at this time.
Corporate
Information
Our principal executive offices are located at 415 East Middlefield Road, Mountain View, CA 94043, and our telephone
number is (650) 919-8100. Our website is www.mobileiron.com. The information posted on our website is not incorporated into
this Annual Report on Form 10-K. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as
amended, are available free of charge on our investor rel ations web site as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the SEC.
You may also access all of our public filings through the SEC's website at www.sec.gov. Further, a copy of this Annual
Report on Form 10-K is located at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information
on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.
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Table of Contents
Item
1
A.
Risk
Factors
Our operations and financial results are subject to various risks and uncertainties including those described below. If any of the
following risks or others not specified below materialize, our business, financial condition and results of operations could be
materially adversely affected. In that case, the trading price of our common stock could decline.
Risks
Related
to
Our
Business
and
Industry
We
have
a
limited
operating
history,
which
makes
it
difficult
to
evaluate
our
prospects
and
future
financial
results
and
may
increase
the
risk
that
we
will
not
be
successful.
As a result of our limited operating history, our ability to forecast our future operating results is limited and subject to a
number of uncertainties, including our ability to plan for and model future growth. We have encountered and expect to continue
to encounter risks and uncertainties frequently experienced by companies in rapidly changing markets. If our assumptions
regarding these uncertainties are incorrect or change in reaction to changes in our markets, or if we do not manage or address
these risks successfully, our results of operations could differ materially from our expectations, and our business could suffer.
Any success that we may experience in the future will depend, in large part, on our ability to, among other things:
— retain and expand our customer base on a cost-effective basis;
— increase revenues from existing customers as they add users or devices;
— increase revenues from existing customers as they purchase additional solutions;
— successfully compete in our markets;
— continue to add features and functionality to our solutions to meet customer demand;
— gain market traction with our MobileIron cloud platform and our mobile apps and content management solutions;
— continue to invest in research and development;
— scale our engineering and internal business operations in an efficient and cost-effective manner;
— scale our global Customer Success organization to make our customers successful in their mobile IT deployments;
— continue to expand our solutions across mobile operating systems and device platforms;
— hire, integrate and retain professional and technical talent.
— make our service provider partners successful in their deployments of our solutions and technology;
— successfully expand our business domestically and internationally; and
— successfully protect our intellectual property and defend against intellectual property infringement claims.
We
have
had
net
losses
each
year
since
our
inception
and
may
not
achieve
or
maintain
profitability
in
the
future.
We have incurred net losses each year since our inception, including net losses of $84.5 million, $61.9 million and
$32.5 million in 2015, 2014 and 2013, respectively. As of December 31 , 2015, our accumulated deficit was $275.2 million. Our
revenue growth has slowed over recent periods, and we may not be able to sustain or increase our growth or achieve or sustain
profitability in the future. Revenue growth has slowed, and may additionally slow or revenue may decline, for a number of
reasons, including, but not limited to our customers’ and/or prospective customers’ failure to
12
Table of Contents
widely deploy mobile apps within their businesses , increasing and entrenched competition, changes in pricing model, a decrease
in size or growth of the mobile IT market, or any failure to capitalize on market opportunities. In addition over the past year, we
have significantly increased our expenditures to support the development and expansion of our business, which has resulted in
increased losses. We plan to continue to invest for future growth, in part by making additional investments in research and
development, and as a result, we do not expect to be profitable for the foreseeable future. In addition, we will need to increase
operating efficiency, which may be challenging given our operational complexity, the expenses outlined above, and expenses
associated with being a public company. As a result of these increased expenditures, we will have to generate and sustain
increased revenues to achieve future profitability. We may incur significant losses in the future for a number of reasons, including
without limitation the other risks and uncertainties described in this Annual Report on Form 10-K. Additionally, we may
encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses
in future periods. If these losses exceed our expectations or our revenue growth expectations are not met in future periods, our
financial performance will be harmed.
Our
operating
results
may
fluctuate
significantly,
which
makes
our
future
results
difficult
to
predict
and
could
cause
our
operating
results
to
fall
below
expectations
or
our
guidance.
Our quarterly operating results have fluctuated in the past and may fluctuate significantly in the future. The timing and
size of sales of our solutions makes our revenues highly variable and difficult to predict and can result in significant fluctuations
in our revenue from period to period. Historically, a substantial portion of our revenue has been generated from sales of software
solutions sold as perpetual licenses to large enterprise companies, which tend to close near the end of a given quarter. Further,
other customers’ buying patterns and sales cycles can vary significantly from quarter to quarter and are not subject to an
established pattern over the course of a quarter. Accordingly, at the beginning of a quarter, we have limited visibility into the level
of sales that will be made in that quarter. If expected revenue at the end of any quarter is reduced or delayed for any reason, we
may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenue, and even a small shortfall
in revenue could disproportionately and adversely affect our operating margin, operating results or other key metrics for a given
quarter.
Our operating results may fluctuate due to a variety of other factors, many of which are outside of our control, and any of
which may cause our stock price to fluctuate. In addition to other risks listed in this “Risk Factors” section, factors that may affect
our operating results include, but are not limited to:
— the inherent complexity, length and associated unpredictability of our sales cycles for our solutions;
— the extent to which our customers and prospective customers delay or defer purchase decisions in a quarter,
particularly in the last few weeks of the quarter, which is when we typically complete a large portion of our sales for
a quarter;
— our ability to develop and release in a timely manner new solutions, features and functionality that meet customer
requirements;
— changes in pricing due to competitive pricing pressure or other factors;
— reductions and reprioritizations in customers’ IT budgets and delays in the purchasing cycles of our customers and
prospective customers;
— variation in sales channels or in mix of solutions sold, including the mix of solutions sold on a perpetual license
versus a subscription or monthly recurring contract, or MRC, basis;
— the timing of recognizing revenue in any given quarter as a result of revenue recognition accounting rules, including
the extent to which revenue from sales transactions in a given period may not be recognized until a future period or,
conversely, the satisfaction of revenue recognition rules in a given period resulting in the recognition of revenue
from transactions initiated in prior periods;
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Table of Contents
— changes in our mix of revenue as a result of our different deployment options and licensing models and the ensuing
revenue recognition effects;
— the effect of litigation;
— changes in foreign currency exchange rates; and
— general economic conditions in our domestic and international markets.
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly operating
results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. You should not rely on
our past results as an indication of our future performance.
If
our
customers
do
not
place
significant
follow-on
orders
to
deploy
our
solutions
widely
throughout
their
companies,
or
if
they
do
not
renew
with
us
or
if
they
do
not
purchase
additional
solutions,
our
future
revenue
and
op
erating
results
will
be
harmed.
In order to increase our revenues we must continually grow our customer base and increase the depth and breadth of the
deployments of our solutions with our existing customers. While customers may initially purchase a relatively modest number of
licenses, it is important to our revenue growth that they later expand the use of our software on substantially more devices or for
more users throughout their business. However, we have experienced a slowdown in perpetual license orders in the last year . We
also need to upsell—to sell additional solutions—to the same customers. Our strategy also depends on our existing customers
renewing their software support or subscription agreements with us. Because of the number of participants, consolidation in the
mobile IT market and competing priorities within customers’ IT budgets, customers may delay making initial purchase orders or
expanding orders as they take into account the evolving mobile IT landscape. Also, if we do not develop new solutions, features
and functionality that meet our customers’ needs, they may not place upsell orders or expand orders. The rate at which our
customers purchase additional solutions depends on a number of factors, including the relative prioritization of the IT budget
allocated to mobile projects versus other IT projects, perceived need for additional solutions, features or functionality, the
reliability of our solutions and other competitive factors, such as pricing and competitors’ offerings. If our efforts to sell
additional licenses to our customers and to upsell additional solutions to our customers are not successful, our business may
suffer.
Further, existing customers that purchase our solutions have no contractual obligation to purchase additional solutions
after the initial subscription or contract period, and given our limited operating history, we are unable to accurately predict our
customer expansion or renewal rates. Our customers’ expansion and renewal rates may decline or fluctuate as a result of a number
of factors, including the level of their satisfaction with our solutions or our customer support, customer budgets and the pricing
and breadth of our solutions compared with the solutions offered by our competitors, any of which may cause our revenue to
grow more slowly than expected, if at all.
For smaller or simpler deployments, the switching costs and time are relatively minor compared to traditional enterprise
software deployments and a customer may decide not to renew with us and switch to a competitor’s offerings. Accordingly, we
must invest significant time and resources in providing ongoing value to our customers. If these efforts fail, or if our customers do
not renew for other reasons, or if they renew on terms less favorable to us, our revenue may decline and our business will suffer.
We
compete
in
rapidly
evolving
markets
and
must
develop
new
solutions
and
enhancements
to
our
existing
solutions.
If
we
fail
to
predict
and
respond
rapidly
to
emerging
technological
trends
and
our
customers’
changing
needs,
we
may
not
be
able
to
remain
competitive.
In
addition,
we
may
not
generate
positive
returns
on
our
research
and
development
investments,
which
may
harm
our
operating
results.
Our markets are characterized by rapidly changing technology, changing customer needs, evolving operating system
standards and frequent introductions of new offerings. To succeed, we must effectively anticipate, and adapt in a timely manner
to, customer and multiple operating system requirements and continue to develop or acquire new solutions and features that meet
market demands and technology trends. Likewise, if our competitors introduce new offerings that compete with ours or
incorporate features that are not available in our solutions, we may be required to
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Table of Contents
reposition our solutions or introduce new solutions in response to such competitive pressure. We may not have access to or have
adequate notice of new operating system developments, and we may experience unanticipated delays in developing new solutions
and cloud services or fail to meet customer expectations for such solutions. If we fail to timely develop and introduce new
solutions or enhancements that respond adequately to new challenges in the mobile IT market, our business could be adversely
affected, especially if our competitors are able to more timely introduce solutions with such increased functionality.
We have invested significant time and financial resources in the development of our platforms and infrastructure and
believe that we must continue to dedicate substantial resources to our research and development efforts to maintain our
competitive position. Developing our products is expensive, and the investment in product development may not generate
additional revenue in the near-term or at all. The research and development of new technologically advanced products is also a
complex and uncertain process requiring high levels of innovation and investment, as well as the accurate forecasts of technology,
market trends and consumer needs. Our failure to successfully develop new and improved products, services and technologies,
may reduce our future growth and profitability and may adversely affect our business, results and financial condition.
We have a primary back-end technology platform that can be used as a cloud service or deployed on premise and a
second back-end platform that is purpose-built as a cloud-only large scale, multi-tenant platform. We must continually invest in
both platforms, and the existence of two back-end technology platforms makes engineering more complex and expensive and may
introduce compatibility challenges. We have made significant investments in the cloud-only platform and have not yet gained
substantial market traction with the cloud-only platform. Should our MobileIron cloud-only platform fail to achieve substantial
market traction, we would lose the value of our investment and our business and operating results may be harmed.
Further, we may be required to commit significant resources to developing new solutions before knowing whether our
investments will result in solutions that the market will accept. We are in the process of phasing out our older cloud-based product
in favor of MobileIron Cloud, our newer and more scalable cloud-only platform. The failure to successfully market MobileIron
Cloud as a replacement and improvement to our older cloud-based product or the failure of our customers and prospective
customers to adopt MobileIron Cloud for any reason could result in a decline in our revenue.
These risks are greater in the mobile IT market because our software is deployed on phones and tablets that run on
different operating systems such as iOS, Android and Windows, and these multiple operating systems change frequently in
response to consumer demand. As a result, we may need to release new software updates at a much greater pace than a traditional
enterprise software company that supports only PCs. We may experience technical design, engineering, marketing and other
difficulties that could delay or prevent the development, introduction or marketing of new solutions and enhancements on both of
our technology platforms. As a result, we may not be successful in modifying our current solutions or introducing new ones in a
timely or appropriately responsive manner, or at all. If we fail to address these changes successfully, our business and operating
results could be materially harmed.
Finally, all of our additional solutions require customers to use our MobileIron platform, whether deployed on-premise
or through our cloud service. As such, virtually all of our revenue depends on the continued adoption and use of our MobileIron
platform. If customers and prospective customers decided to stop using or purchasing the MobileIron platform, our product
strategy would fail and our business would be harmed.
An
increasing
portion
of
our
sales
has
been
generated
from
subscription,
including
MRC,
licenses,
which
involves
certain
risks.
An increasing portion of our sales has been generated from subscription, including MRC, licenses. This mix shift
towards MRC and other subscription licensing, presents a number of risks to us. For example, arrangements entered into on a
subscription basis generally delay the timing of revenue recognition and often require the incurrence of up-front costs, which can
be significant. Subscription revenues are recognized over the subscription period, which is typically 12 months. MRC revenue is
recognized monthly on the basis of active users or devices and thus will fluctuate from month to month. We receive no revenue or
billings on MRC at the time the deal is booked. As a result, even if customer demand increases, our revenues will not increase at
the same rate as in prior periods, or may decline.
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Table of Contents
Customers in a subscription arrangement may elect not to renew their contractual arrangement with us upon expiration, or they
may attempt to renegotiate pricing or other contractual terms on terms that are less favorable to us. We recognize a substantial
portion of our subscription revenues over the term of the subscription agreement; however, we incur upfront costs, such as sales
commissions, related to acquiring such customers. Therefore, as we add customers in a particular year, our immediate costs to
acquire customers may increase significantly relative to revenues recognized in that same year, which could result in increased
losses or decreased profits in that period. Service providers that operate on an MRC billing model typically report to us in arrears
on a monthly basis the number of actual users or devices deployed, and then we generate invoices based on those reports.
Therefore, invoicing and collection logistics often result in a longer collection cycle, which negatively affects our cash flow. In
addition, under an MRC billing model, the service provider typically has the contractual and business relationship with the
customer, and thus we typically depend more heavily on the service provider partner for both customer acquisition and support
under this billing model . To the extent that service providers bundle our solution with their offerings and price aggressively, it
could increase this shift to MRC billings.
We
are
in
a
highly
competitive
market,
and
competitive
pressures
from
existing
and
new
companies
may
harm
our
business,
revenues,
growth
rates
and
market
share.
In
addition,
there
has
been
consolidation
in
our
market,
and
a
number
of
our
current
or
potential
competitors
have
longer
operating
histories,
greater
brand
recognition,
larger
customer
bases
and
significantly
greater
resources
than
we
do.
Our market is intensely competitive, and we expect competition to increase in the future from established competitors,
consolidations and new market entrants. Our major competitors include Blackberry, Citrix, IBM, Microsoft and VMware. A
number of our historical competitors have been purchased by large corporations. For example, AirWatch was acquired by
VMware and Good Technology was acquired by Blackberry. These large corporations have longer operating histories, greater
name recognition, larger and better established customer bases, more channel partners, and significantly greater financial,
technical, sales, marketing and other resources than we have. Consolidation is expected to continue in our industry. As a result of
consolidation, our competitors may be able to adapt more quickly to new or emerging technologies and changes in customer
requirements, devote greater resources to the promotion and sale of their solutions and services, initiate or withstand substantial
price competition, take advantage of acquisitions or other opportunities more readily, and develop and expand their solution and
service offerings and features more quickly than we can. In addition, certain of our competitors may be able to leverage their
relationships with customers based on an installed base of solutions or to incorporate functionality into existing solutions to gain
business in a manner that discourages customers from including us in competitive bidding processes, evaluating and/or
purchasing our solutions, including through selling at zero or negative margins, through solution bundling or through enterprise
license deals. Some potential customers, especially Forbes Global 2000 Leading Companies, have already made investments in,
or may make investments in, substantial personnel and financial resources and established deep relationships with these much
larger enterprise IT vendors, which may make them reluctant to evaluate our solutions or work with us regardless of solution
performance or features. Potential customers may prefer to purchase a broad suite of solutions from a single provider, or may
prefer to purchase mobile IT solutions from an existing supplier rather than a new supplier, regardless of performance or features.
We expect competition to intensify in the future as new and existing competitors introduce new solutions into our
market. In addition, some of our competitors have entered into partnerships or other strategic relationships to offer a more
comprehensive solution than they individually had offered. We expect this trend to continue as companies attempt to strengthen
or maintain their market positions in an evolving industry. This competition has resulted in the past and could in the future result
in increased pricing pressure, reduced operating margins, increased sales and marketing expenses, and failure to increase, or the
loss of, market share, any of which could harm our business, operating results or financial condition. Competitors’ offerings may
in the future have better performance, better features, lower prices and broader acceptance than our solutions, or embody new
technologies, which could render our existing solutions obsolete or less attractive to customers, or be bundled with legacy
enterprise security and management products as a “one-stop-shop” offering, which certain customers with large installed bases of
those legacy products may prefer. If we fail to keep up with technological changes or to convince our customers and potential
customers of the value of our solutions, our business, operating results and financial condition could be materially and adversely
affected.
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Table of Contents
Changes
in
features
and
functionality
by
operating
system
providers
and
mobile
device
manufacturers
could
cause
us
to
make
short-term
changes
in
engineering
focus
or
product
development
or
otherwise
impair
our
product
development
efforts
or
strategy,
increase
our
costs,
and
harm
our
business.
Our platform depends on interoperability with operating systems, such as those provided by Apple, Google and
Microsoft, as well as device manufacturers. Because mobile operating systems are released more frequently than legacy PC
operating systems, and we typically have limited advance notice of changes in features and functionality of operating systems and
mobile devices, we may be forced to divert resources from our preexisting product roadmap in order to accommodate these
changes. As a result of this limited advance notice, we also have a short time to implement and test changes to our product to
accommodate these new features, which increases the risk of product defects. In addition, if we fail to enable IT departments to
support operating system upgrades upon release, our business and reputation could suffer. This could disrupt our product roadmap
and cause us to delay introduction of planned solutions, features and functionality, which could harm our business.
Operating system providers have included, and may continue to include, features and functionality in their operating
systems that are comparable to certain of our solutions, features and/or functionality, thereby making our platform less valuable.
The inclusion of, or the announcement of an intent to include, functionality perceived to be similar to that offered by our mobile
IT solutions in mobile operating systems may have an adverse effect on our ability to market and sell our solutions. Even if the
functionality offered by mobile operating system providers is more limited than our solutions, a significant number of potential
customers may elect to accept such limited functionality in lieu of purchasing our solutions. Furthermore, some of the features
and functionality in our solutions require interoperability with operating system APIs, and if operating system providers decide to
restrict our access to their APIs, that functionality would be lost and our business could be impaired. Finally, we have entered into
contractual arrangements with operating systems providers and/or mobile device manufactures, under which we are obligated to
certain development priorities, which can further limit our engineering flexibility.
A
failure
of
our
product
strategy
with
regard
to
mobile
application
and
content
management
could
harm
our
business.
Our product and business strategy is highly dependent on our existing and potential customers’ continued adoption of our
solutions, features and functionality for both mobile application and mobile content management. Slow adoption of customer-
built mobile business applications for iOS, Android and Windows would slow the need for and adoption of our platform for
mobile application management and security because if customers are not deploying business apps other than email they may be
content to continue using more basic MDM offerings and not see the value in our more advanced mobile application management
and data security capabilities . Customers’ preference for mobile applications could also shift to browser-based applications that
can run on any mobile device through a web browser, which would reduce the value of our mobile application containerization
solution. In addition, operating system providers could act in ways that could harm our mobile content and apps product strategy.
For example, Microsoft released Office 365 and is bundling certain mobile device management capabilities with Office 365 in an
attempt to dissuade customers from using EMM solutions other than Microsoft. If this strategy succeeds, the value of our own
mobile content management solution and the value of our ecosystem of collaboration and storage partners may diminish. If our
product strategy around mobile apps and content management fails or is not as successful as we hope for these or other reasons,
the value of our investment would be lost and our results of operations would be harmed.
We
have
experienced
turnover,
and
the
loss
of
key
personnel
or
an
inability
to
attract,
retain
and
motivate
qualified
personnel
may
impair
our
ability
to
expand
our
business.
Our success is substantially dependent upon the continued service and performance of our senior management team and
key technical, marketing, sales and operations personnel, including our senior management. In 2015, we experienced turnover in
our executive team, and we hired a new CFO, and in early 2016, we hired a new CEO, a new SVP of Engineering and are
currently seeking to hire a new SVP of Sales. The replace ment of any members of our senior management team or other key
personnel likely would involve significant time and costs and may harm our business, operating results and financial condition.
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Table of Contents
Our future success also depends, in part, on our ability to continue to attract, integrate and retain highly skilled personnel,
in particular engineers and sales people. Competition for highly skilled personnel is frequently intense, especially in the San
Francisco Bay Area, where we have a substantial presence and need for highly skilled personnel, including, in particular,
engineers. We must offer competitive compensation and opportunities for professional growth in order to attract and retain these
highly skilled employees. Failure to successfully attract, integrate or retain qualified personnel to fulfill our current or future
needs may negatively impact our growth.
If
we
are
not
able
to
scale
our
business
and
manage
our
expenses,
ou
r
operating
results
may
suffer.
We have significantly expanded our operations during the past few years. In particular, we have invested in additional
engineering and customer success resources to support and expand both our MobileIron cloud services and on-premise software
infrastructure and our associated customer success infrastructure. While we have added personnel to our engineering and
customer success teams, our need to scale our business has placed, and will continue to place, a significant strain on our
administrative and operational business processes, infrastructure, facilities and other resources. Our ability to manage our
operations will require significant expenditures and allocation of valuable management resources to improve internal business
processes and systems, including investments in automation. Further international expansion may also be required for our
continued business growth, and managing any international expansion will require additional resources and controls. If our
operations infrastructure and business processes fail to keep pace with our business and customer requirements, customers may
experience disruptions in service or support or we may not scale the business efficiently, which could adversely affect our
reputation and adversely affect our revenues. There is no guarantee that we will be able to continue to develop and expand our
infrastructure and business processes at the pace necessary to scale the business, and our failure to do so may have an adverse
effect on our business. If we fail to efficiently expand our engineering, operations, cloud infrastructure, IT and financial
organizations and systems, or if we fail to implement or maintain effective internal business processes, controls and procedures,
our costs and expenses may increase more than we planned or we may fail to execute on our product roadmap or our business
plan, any of which would likely seriously harm our bus iness, operating results and financial condition.
A
security
breach
of
our
cloud
service
infrastructure
or
a
disruption
of
our
cloud
service
availability
for
any
reason
could
result
in
liabilities,
lost
business
and
reputational
harm.
In connection with providing our cloud service to customers, we obtain access to certain sensitive data, such as
employees’ names, registration credentials, mobile device ID, geolocation of last device check-in, business email addresses,
mobile phone number, business contact information and the list of applications installed on the mobile devices. Any security
breach of the systems used to provide the cloud service, whether through third-party action or employee error or malfeasance,
could result in damage, loss, misuse or theft of such data. A breach could also give rise to litigation or require us to incur financial
and operational expenses in connection with fulfillment of our indemnity obligations to our cloud service customers and setting or
defending claims made against us. Techniques used to sabotage or obtain unauthorized access information processing systems
change frequently. In addition, they, generally, are not recognized until launched against a target. As a result, we may be unable
to anticipate these techniques or to implement adequate preventative measures or mitigation measures in a timely manner.
Because our software is designed to enable IT administrators to secure and manage sensitive data transmitted to or stored on
employees’ mobile devices, the publicity associated with an actual or perceived breach of our cloud service infrastructure would
likely result in r particular reputational damage, as well as loss of potential sales and existing customers. In addition, unexpected
increases in demand at one customer may affect the overall service in unanticipated ways and may cause a disruption in service
for other customers of this platform. We have experienced, and may in the future experience, disruptions, outages and other
performance problems with our cloud service. These problems may be caused by a variety of factors, including infrastructure
changes, human or software errors, malicious code, denial or service or other security attacks, fraud, spikes in customer usage and
interruption or loss of critical third party hosting, power or Internet connectivity services. If we sustain frequent or prolonged
disruptions of our cloud services for any reason, our reputation, business and results of operations would be seriously harmed.
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Defects
in
our
solutions
could
harm
our
business,
including
as
a
result
of
customer
dissatisfaction,
data
breaches
or
other
disruption,
and
subject
us
to
substantial
liability.
Because the mobile IT market involves multiple operating platforms, we provide frequent incremental releases of
solution updates and functional enhancements. Such new versions frequently contain undetected errors when first introduced or
released. We have often found defects in new releases of our solutions, and new errors in our existing solutions may be detected
in the future. Defects in our solutions may also result in vulnerability to security attacks, which could result in claims by
customers and users for losses that they sustain.
Because our customers use our solutions for important aspects of their business, any errors, defects, disruptions in
service or other performance problems with our solutions could hurt our reputation and may damage our customers’ businesses.
In certain instances, our customers have stopped using, or failed to expand use of, our solutions as a result of defects, and this
may happen in the future. In addition, customers may delay or withhold payment to us, elect not to renew and make warranty
claims or other claims against us. In addition, we rely on positive customer experience in order to sell additional products to other
customers or sell to new customers. Defects or disruptions in our solution could result in reputational harm and loss of future
sales. In addition, regardless of the party at fault, errors of these kinds divert the attention of our engineering personnel from our
development efforts, damage our reputation and the reputation of our solutions, cause significant customer relations problems and
can result in product liability claims.
Security
breaches
and
other
disruptions
of
our
information
systems
could
significantly
impair
our
operations,
compromise
our
ability
to
conduct
our
business
and
deliver
our
products
and
services,
and
result
in
significant
data
losses,
theft
of
our
intellectual
property,
significant
liability,
damage
to
our
reputation
and
loss
of
current
and
future
business.
We rely on our IT systems for almost all of our business operations, including internal operations, product development,
sales and marketing, and communications with customers and other business partners. The secure processing, maintenance and
transmission of both our own sensitive information and our customers’ data is critical to our operations and business strategy.
Despite our security measures, our information technology systems and infrastructure may be vulnerable to attacks by hackers or
breached due to employee error, malfeasance or other disruptions. Any cyber security attack could result in the damage, loss, theft
or misappropriation of our proprietary information or our customers’ data and/or cause interruptions of our internal business
operations or the delivery of our solutions to customers. Because the techniques used by unauthorized persons to access or
sabotage networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate
these techniques or readily detect or take remedial action against an attack. Further, if unauthorized access or sabotage remains
undetected for an extended period of time, the effects of such breach could be exacerbated. We also depend on our employees to
handle confidential data appropriately and deploy our information resources in a secure fashion that does not expose our network
systems to security breaches and the loss of data. Any breach as a result of cyber criminals, or employee malfeasance or error
could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any
insurance may not be sufficient to cover all of our losses from any future breaches of our systems. We have also outsourced a
number of our business functions to third parties, and thus our business operations also depend, in part, on their cybersecurity
measures. Any unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, liability
under laws that protect the privacy of personal information, regulatory penalties, and could disrupt our operations and the
solutions we provide to customers, and damage our reputation, which could adversely affect our business.
Disruptions
of
the
third-party
data
centers
that
host
our
cloud
service
could
result
in
delays
or
outages
of
our
cloud
service
and
harm
our
business.
We currently host our cloud service from third-party data center facilities operated by several different providers located
around the world, such as Equinix and Amazon Web Services. Any damage to, or failure of, our cloud service that is hosted by
these third parties, whether as a result of our actions, actions by the third-party data centers, actions by other third parties, or acts
of God, could result in interruptions in our cloud service and/or the loss of data. While the third-party hosting centers host the
server infrastructure, we manage the cloud services through our site reliability engineering team and need to support version
control, changes in cloud software parameters and the evolution of our solutions, all in a multi-OS environment. As we continue
to add data centers and capacity in our existing data centers, we
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may move or transfer our data and our customers’ data. Despite precautions taken during this process, any unsuccessful data
transfers may impair the delivery of our service. In some cases, we have entered into contractual service level commitments to
maintain uptime of at least 99.9% for our cloud services platform and if we or our third-party data center facilities fail to meet
these service level commitments, we may have to issue service credits to these customers. Impairment of, or interruptions in, our
cloud services may reduce our subscription revenues, subject us to claims and litigation, cause our customers to terminate their
subscriptions and adversely affect our subscription renewal rates and our ability to attract new customers. Our business will also
be harmed if our customers and potential customers believe our services are unreliable.
We do not control, or in some cases have limited control over, the operation of the data center facilities we use, and they
are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar
events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, and to adverse
events caused by operator error. We cannot rapidly switch to new data centers or move customers from one data center to another
in the event of any adverse event. Despite precautions taken at these facilities, the occurrence of a natural disaster, an act of
terrorism or other act of malfeasance, a decision to close the facilities without adequate notice, or other unanticipated problems at
these facilities could result in lengthy interruptions in our service and the loss of customer data and business.
The
prices
of
our
solutions
may
decrease
or
we
may
change
our
licensing
or
subscription
renewal
programs
or
bundling
arrangements,
which
may
reduce
our
revenue
and
adversely
impact
our
financial
results.
The prices for our solutions may decline for a variety of reasons, including competitive pricing pressures, discounts, a
change in our mix of solutions toward subscription, enterprise-wide licensing arrangements, bundling of solutions, features and
functionality by us or our competitors, potential changes in our pricing, anticipation of the introduction of new solutions, or
promotional programs for customers or channel partners. Competition and consolidation continue to increase in the markets in
which we participate, and we expect competition to further increase in the future, leading to increased pricing pressures. Larger
competitors with more diverse product lines may reduce the price of solutions or services that compete with ours or may bundle
their solutions with other solutions and services. Furthermore, we anticipate that the sales prices and gross profits for our
solutions will decrease over product life cycles. If we are unable to increase sales to offset any decline in our prices, our business
and results of operations would be harmed.
We continually re-evaluate our licensing programs and subscription renewal programs, including specific license models
and terms and conditions. We have in the past implemented, and could in the future implement, new licensing programs and
subscription renewal programs or bundling arrangements, including promotional programs or specified enhancements to our
current and future solutions. Such changes could result in deferring revenue recognition regardless of the date of the initial
shipment or licensing of our solutions. Changes to our licensing programs and subscription renewal programs, including the
timing of the release of enhancements, upgrades, maintenance releases, the term of the contract, discounts, promotions and other
factors, could impact the timing of the recognition of revenue for our solutions, related enhancements and services and could
adversely affect our operating results and financial condition.
Our
ability
to
sell
our
solutions
is
highly
dependent
on
the
quality
of
our
support,
which
is
made
complex
by
the
requirements
of
mobile
IT.
Our
failure
to
deliver
high
quality
support
would
have
a
material
adverse
effect
on
our
sales
and
results
of
operations.
Once our solutions are deployed, our customers depend on our support organization or that of our channel partners to
resolve any issues relating to our solutions. Our failure to provide effective support has in the past, and would in the future,
adversely affect our ability to sell our solutions or increase the number of licenses sold to existing customers. Our customer
support is especially critical because the mobile IT market requires relatively frequent software releases. Mobile IT requires a
complex set of features, functionality and controls, which makes support critical and difficult. In addition, we target companies on
the Forbes Global 2000 Leading Companies list, many of whom have complex networks and require higher levels of support than
smaller customers. As customers deploy more licenses and purchase a broader array of our solutions, the complexity and
difficulty of our support obligations increase. If we fail to meet the requirements of the larger customers, it may be more difficult
to increase our deployments either within our existing Forbes Global 2000 Leading Companies list or other customers or with
new Forbes Global 2000 Leading
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Table of Contents
Companies list customers. We face additional challenges in supporting our non-U.S. customers, including the need to rely on
channel partners to provide support.
We
rely
substantially
on
channel
partners
for
the
sale
and
distribution
of
our
solutions
and,
in
some
instances,
for
the
support
of
our
solutions.
A
loss
of
certain
channel
partners,
a
decrease
in
revenues
from
certain
of
these
channel
partners
or
any
failure
in
our
channel
strategy
could
adversely
affect
our
business
A substantial portion of our sales are through channel partners – either telecommunications carriers, which we call
service providers, or other resellers -- and thus we depend on our channel partners and on our channel partner strategy for the vast
majority of our revenue. Our international resellers often enter into agreements directly with our mutual customers to host the
software and provide other value-added services, such as IT administration.
Our service provider partners often provide support to our customers and enter into similar agreements directly with our
mutual customers to host the software and/or provide other value-added services. Our agreements and operating relationships
with our service provider partners are complex and require a significant commitment of internal time and resources. In addition,
our service provider partners are large corporations with multiple strategic businesses and relationships, and thus our business
may not be significant to them in the overall context of their much larger enterprise. Even if the service provider partner considers
us to be an important strategic relationship, internal processes at these large partners are sometimes difficult and time-consuming
to navigate. Thus, any loss of a major channel partner or failure of our channel strategy could adversely affect our business.
AT&T, as a reseller, is our largest service provider pa rtner and was responsible for 16 % of our total revenue for the year ended
December 31 , 2015.
Our agreements with AT&T and our other channel partners are non-exclusive and most of our channel partners have
entered, and may continue to enter, into strategic relationships with our competitors. Our channel partners may terminate their
respective relationships with us with limited or no notice and with limited or no penalty, pursue other partnerships or
relationships, or attempt to develop or acquire solutions or services that compete with our solutions. If our channel partners do not
effectively market and sell our solutions, if they choose to place greater emphasis on solutions of their own or those offered by
our competitors, or if they fail to provide adequate support or otherwise meet the needs of our customers, our ability to grow our
business and sell our solutions may be adversely affected. The loss of our channel partners, in particular AT&T, the failure to
recruit additional channel partners, or any reduction or delay in sales of our solutions by our channel partners could materially and
adversely affect our results of operations.
We are in the process of changing our North American channel strategy such that most of our North American resellers
will be required to purchase our solutions through a single distributor. This change in strategy carries risks, including an increased
dependence on one distributor and the possible loss of our existing resellers. In addition, we have sold and may in the future sell
directly to end-user customers, which may adversely affect our relationship with our channel partners.
Our
sales
cycles
for
large
enterprises
are
often
long,
unpredictable
and
expensive.
As
a
result,
our
sales
and
revenue
are
difficult
to
predict
and
may
vary
substantially
from
period
to
period,
which
may
cause
our
operating
results
to
fluctuate
significantly.
Our sales efforts involve educating our customers about the use and benefits of our solutions, including the technical
capabilities of our solutions and the business value of our solutions. Many of our large customers have very complex IT systems,
mobile environments and data privacy and security requirements. Accordingly, many of these customers undertake a significant
evaluation process, which frequently involves not only our solutions, but also those of our competitors, and has resulted in
lengthy sales cycle. We spend substantial time, money and effort on our sales activities without any assurance that our efforts will
produce any sales. In addition, purchases of our solutions are frequently subject to budget constraints, multiple approvals, lengthy
contract negotiations and unplanned administrative, processing and other delays. Moreover, the evolving nature of the mobile IT
market may lead prospective customers to postpone their purchasing decisions pending adoption of technology by others or
pending potential consolidation in the market. As a result of our lengthy sales cycle, it is difficult to predict whether and when a
sale will be completed, and our operating results may vary significantly from quarter to quarter. Even if sales are completed, the
revenues we receive from these customers may not be sufficient to offset our upfront investments.
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Table of Contents
We
seek
to
sell
our
solutions
to
large
enterprises.
Sales
to
and
support
of
these
types
of
enterprises
involve
risks
that
could
harm
our
business,
financial
position
and
results
of
operations.
Our growth strategy is dependent, in part, upon increasing sales of our solutions to large enterprises. Sales to large
customers involve risks that may not be present (or that are present to a lesser extent) with sales to smaller entities. These risks
include:
— more complicated network requirements, which result in more difficult and time-consuming implementation
processes;
— more intense and time-consuming customer support practices;
— increased purchasing power and leverage held by large customers in negotiating contractual arrangements with us;
— more customer-favorable contractual terms, including penalties;
— longer sales cycles and the associated risk that substantial time and resources may be spent on a potential customer
that ultimately elects not to purchase our solution or purchases fewer licenses than we had anticipated;
— closer relationships with, and dependence upon, large technology companies that offer competitive solutions;
— an RFP process that may favor incumbent or larger technology companies;
— increased reputational risk as a result of data breaches or other problems involving high profile customers; and
— more pressure for discounts.
If we are unable to increase sales of our solutions to large enterprises while mitigating the risks associated with serving
such customers, our business, financial position and results of operations may suffer.
Our
failure
to
comply
with
privacy
laws
and
standards
could
have
a
material
adverse
effect
on
our
business.
Personal privacy has become a significant issue in the United States and in many other countries where we offer our
solutions. Many federal, state and foreign government bodies and agencies have adopted or are considering adopting laws and
regulations regarding the collection, use, disclosure and retention of personal information. In the United States, these include, for
example, rules and regulations promulgated under the authority of the Federal Trade Commission, the Health Insurance
Portability and Accountability Act of 1996, or HIPAA, the Gramm-Leach-Bliley Act and state breach notification laws.
Internationally, different jurisdictions have a variety of data security and privacy laws, with which we or our customers
must comply, including the Data Protection Directive established in the European Union and the Federal Data Protection Act in
Germany. The regulatory framework for privacy issues worldwide is currently evolving and is likely to remain uncertain for the
foreseeable future. For example, in October 2015, the European Court of Justice declared invalid the European Commission’s
decision creating the so-called Safe Harbor Framework, which we have relied on to transfer personal information from the
European Union to the United States. The court’s decision, has created legal uncertainty about transfers of data and what steps the
European Commission, EU member state authorities, and US authorities will take. The European Commission and the United
States have agreed in principle to a new transatlantic data transfer framework to replace the Safe Harbor. The proposed
framework must be reviewed and approved by European data protection authorities and other stakeholders before it is finalized.
If any of our European customers or prospective customers decide not to purchase our software as a result of this
regulatory uncertainty, our revenues could decline and our business could suffer. In addition to laws and regulations,
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privacy advocacy and industry groups or other private parties may propose new and different privacy standards. Because the
interpretation and application of privacy and data protection laws and privacy standards are still uncertain, it is possible that these
laws or privacy standards may be interpreted and applied in a manner that is inconsistent with our existing data management
practices or the features of our solutions. Any inability to adequately address privacy concerns, even if unfounded, or to comply
with applicable privacy or data protection laws, regulations and privacy standards, could result in additional cost and liability to
us, damage our reputation, inhibit sales of our solutions and harm our business.
Our
failure
to
adequately
protect
personal
information
and
to
maintain
the
security
of
enterprise
data
could
have
a
material
adverse
effect
on
our
business.
Employee adoption of mobile initiatives depends on the credible and clear separation of enterprise applications and data
and personal information on the device, as well as the privacy of such data. For our customers, it is also essential to maintain the
security of enterprise data properly while retaining the native experience users expect. While we contractually obligate our
customers to make the required disclosures and gain the required consents from their employees in order to comply with
applicable law regarding the processing of personally identifiable information that the employer may access, we do not control
whether they in fact do so, and in some jurisdictions such employee consent may not be enforceable. Any claim by an employee
that his or her employer had not complied with applicable privacy laws in connection with the deployment and use of our
software on the employee’s mobile device could harm our reputation and business and subject us to liability, whether or not
warranted. If our solutions fail to adequately separate personal information and to maintain the security of enterprise applications
and data, the market perception of the effectiveness of our solutions could be harmed, employee adoption of mobile initiatives
could be slowed, we could lose potential sales and existing customers, and we could incur significant liabilities. Privacy concerns,
whether valid or not, may inhibit market adoption of our solutions, particularly in certain industries and foreign countries.
Furthermore, the attention garnered by the National Security Agency’s bulk intelligence collection programs may result in further
concerns surrounding privacy and technology products.
We
may
acquire
other
businesses
which
could
require
significant
management
attention,
disrupt
our
business,
dilute
stockholder
value
and
adversely
affect
our
operating
results.
As part of our business strategy, we may make investments in complementary companies, solutions or technologies. We
may not be able to find suitable acquisition candidates, and we may not be able to complete such acquisitions on favorable terms,
if at all. If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals. In
addition, if we are unsuccessful at integrating such acquisitions or developing the acquired technologies, the revenue and
operating results of the combined company could be adversely affected. We have in the past and could in the future record
impairment losses in connection with acquisitions. Further, the integration of an acquired company typically requires significant
time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the
acquired technology or personnel or accurately forecast the financial impact of an acquisition transaction, including accounting
charges. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could
adversely affect our financial condition or the value of our common stock. The sale of equity or issuance of debt to finance any
such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed
obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.
We
have
indemnity
obligations
under
our
contracts
with
our
customers
and
channel
partners,
which
could
have
a
material
adverse
effect
on
our
business.
The mobile industry has been characterized by substantial patent infringement lawsuits. In our agreements with
customers and channel partners, we typically agree to indemnify them for losses related to, among other things, claims by third
parties of intellectual property infringement and sometimes data breaches resulting in the compromise of personal data. If any
such indemnification obligations are triggered, we could face substantial liabilities or be forced to make changes to our solutions
or terminate our customer agreements and refund monies. In addition, provisions regarding limitation of liability in our
agreements with customers or channel partners may not be enforceable in some circumstances or jurisdictions or may not protect
us from claims and related liabilities and costs. We maintain insurance
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to protect against certain types of claims associated with the use of our solutions, but our insurance may not adequately cover any
such claims. In addition, even claims that ultimately are unsuccessful could result in expenditures of and divert management’s
time and other resources. Furthermore, any legal claims from customers and channel partners could result in reputational harm
and the delay or loss of market acceptance of our solutions.
A
portion
of
our
revenues
are
generated
by
sales
to
heavily
regulated
organizations
and
governmental
entities,
which
are
subject
to
a
number
of
challenges
and
risks.
Some of our customers are either in highly regulated industries or are governmental entities and may be required to
comply with more stringent regulations in connection with the implementation and use of our solutions. Selling to these entities
can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any
assurance that we will successfully complete a sale or that the organization will deploy our solution at scale. Highly regulated and
governmental entities often require contract terms that differ from our standard arrangements and impose compliance
requirements that are complicated, require preferential pricing or “most favored nation” terms and conditions, or are otherwise
time-consuming and expensive to satisfy. Government demand and payment for our solutions and services may be impacted by
public sector budgetary cycles and funding authorizations, particularly in light of U.S. budgetary challenges, with funding
reductions or delays adversely affecting public sector demand for our solutions. The additional costs associated with providing
our solutions to governmental entities and highly regulated customers could harm our margins. Moreover, changes in the
underlying regulatory conditions that affect these types of customers could harm our ability to efficiently provide our solutions to
them and to grow or maintain our customer base.
If
our
solutions
do
not
interoperate
with
our
customers’
IT
infrastructure,
sales
of
our
solutions
could
be
negatively
affected.
Our solutions need to interoperate with our customers’ existing IT infrastructures, which have varied and complex
specifications. As a result, we must attempt to ensure that our solutions interoperate effectively with these different, complex and
varied back-end environments. To meet these requirements, we have and must continue to undertake development and testing
efforts that require significant capital and employee resources. We may not accomplish these development efforts quickly or cost-
effectively, or at all. If our solutions do not interoperate effectively, orders for our solutions could be delayed or cancelled, which
would harm our revenues, gross margins and reputation, potentially resulting in the loss of existing and potential customers. The
failure of our solutions to interoperate effectively within the enterprise environment may divert the attention of our engineering
personnel from our development efforts and cause significant customer relations problems. In addition, if our customers are
unable to implement our solutions successfully, they may not renew or expand their deployments of our solutions, customer
perceptions of our solutions may be impaired and our reputation and brand may suffer.
Although
technical
problems
experienced
by
users
may
not
be
caused
by
our
solutions,
our
business
and
reputation
may
be
harmed
if
users
perceive
our
solutions
as
the
cause
of
a
device
failure.
The ability of our solutions to operate effectively can be negatively impacted by many different elements unrelated to our
solutions. For example, a user’s experience may suffer from an incorrect setting in his or her mobile device, an issue relating to
his or her employer’s corporate network or an issue relating to the underlying mobile operating system, none of which we control.
Even though technical problems experienced by users may not be caused by our solutions, users often perceive the underlying
cause to be a result of poor performance of our solution. This perception, even if incorrect, could harm our business and
reputation.
Our
customers
may
exceed
their
licensed
device
or
user
count,
and
it
is
sometimes
difficult
to
collect
payments
as
a
result
of
channel
logistics,
which
could
harm
our
business,
financial
position
and
results
of
operations.
Our customers license our solutions on either a per-device or per-user basis. Because we sell the vast majority of our
solutions through channel partners, and in some cases multiple tiers of channel partners, the logistics of collecting payments for
excess usage can sometimes be time-consuming. We may also encounter difficulty collecting accounts receivable and could be
exposed to risks associated with uncollectible accounts receivable. Economic conditions may impact some of our customers’
ability to pay their accounts payable. If we are unable to collect from our customers for
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their excess usage or otherwise or if we have to write down our accounts receivable, our revenues and operating results would
suffer.
If
the
market
for
our
solutions
shrinks
or
does
not
continue
to
develop
as
we
expect,
our
growth
prospects
may
be
harmed
The success of our business depends on the continued growth and proliferation of mobile IT infrastructure as an
increasingly important computing platform for businesses. Our business plan assumes that the demand for mobile IT solutions
and the deployment of business apps on mobile devices will increase. However, the mobile IT market may not develop as quickly
as we expect, or at all, and businesses may not continue to elect to utilize mobile IT solutions as an advanced business platform.
This market for our solutions may not develop for a variety of reasons, including that larger, more established companies will
enter the market or that mobile operating system companies will offer substantially similar functionality or that companies may
not deploy business apps at scale and thus may be satisfied with less advanced technologies. Accordingly, demand for our
solutions may not continue to develop as we anticipate, or at all, and the growth of our business and results of operations may be
adversely affected. In addition, because we derive substantially all of our revenue from the adoption and use of our platform, a
decline or slowing growth in the mobile IT market would harm the results of our business operations more seriously than if we
derived significant revenue from a variety of other products and services.
Our
estimates
of
market
opportunity
and
forecasts
of
market
growth
may
prove
to
be
inaccurate,
and
even
if
the
markets
in
which
we
compete
achieve
the
forecasted
growth,
we
cannot
assure
you
our
business
will
grow
at
similar
rates,
if
at
all.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove
to be accurate. Forecasts relating to our market opportunity and the expected growth in the mobile IT market and other markets
may prove to be inaccurate. Even if these markets experience the forecasted growth, we may not grow our business at similar
rates, or at all. Our growth will be affected by many factors, including our success in implementing our business strategy, which
is subject to many risks and uncertainties.
Seasonality
may
cause
fluctuations
in
our
revenue.
We believe there are significant seasonal factors that may cause us to record higher revenue in some quarters compared
with others. We believe this variability is largely due to our customers’ budgetary and spending patterns, as many customers
spend the unused portions of their discretionary budgets prior to the end of their fiscal years. For example, we have historically
recorded our highest level of total revenue in our fourth quarter, which we believe corresponds to the fourth quarter of a majority
of our customers. In addition, the type of budget (operating versus capital) available to a customer may affect its decision to
purchase a perpetual license or a subscription license. In addition, our rapid growth rate in 2012 through 2014 may have made
seasonal fluctuations more difficult to detect. As our rate of growth has slowed, seasonal or cyclical variations in our operations
may become more pronounced, and our business, results of operations and financial position may be adversely affected.
Prolonged
economic
uncertainties
or
downturns
could
materially
adversely
affect
our
business.
Current or future economic downturns or uncertainty could adversely affect our business operations or financial results.
Negative conditions in the general economy both in the United States and abroad, including conditions resulting from financial
and credit market fluctuations and terrorist attacks on the United States, Europe, Asia Pacific or elsewhere, could cause a decrease
in corporate spending on enterprise software in general and negatively affect the rate of growth of our business. General
worldwide economic conditions have experienced a significant downturn and continue to remain unstable. These conditions make
it extremely difficult for our customers and us to forecast and plan future business activities accurately, and they could cause our
customers to reevaluate their decision to purchase our products, which could delay and lengthen our sales cycles, or to
deprioritize the portion of their IT budget focused on mobility. We cannot predict the timing, strength or duration of any
economic slowdown, instability or recovery, generally or within any particular industry or geography. If the economic conditions
of the general economy or industries in which we operate worsen from present levels, our business operations and financial
results could be adversely affected.
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Table of Contents
Our
business
is
subject
to
the
risks
of
earthquakes,
fire,
floods
and
other
natural
catastrophic
events,
and
to
interruption
by
manmade
problems
such
as
network
security
breaches,
computer
viruses
or
terrorism.
Our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity. A significant
natural disaster, such as an earthquake, fire or flood, occurring near our headquarters could have a material adverse impact on our
business, operating results and financial condition. Despite the implementation of network security measures, our networks also
may be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering. In addition, natural
disasters, acts of terrorism or war could cause disruptions in our or our customers’ businesses or the economy as a whole. We also
rely on information technology systems to communicate among our workforce and with third parties. Any disruption to our
communications or systems, whether caused by a natural disaster or by manmade problems, such as power disruptions, could
adversely affect our business.
If
we
are
unable
to
implement
and
maintain
effective
internal
controls
over
financial
reporting
in
the
future,
investors
may
lose
confidence
in
the
accuracy
and
completeness
of
our
financial
reports
and
the
market
price
of
our
common
stock
may
be
negatively
affected.
As a public company, we are required to maintain internal controls over financial reporting and to report any material
weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act) requires that we
furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
Management’s assessment need s to include disclosure of any material weaknesses identified in our internal controls over
financial reporting. Our independent registered public accounting firm will not be required to attest to the effectiveness of our
internal controls over financial reporting until our first annual report required to be filed with the Securities and Exchange
Commission, or SEC, following the date we are no longer an “emerging growth company,” as defined in the JOBS Act. We
currently continue to qualify as an “emerging growth company,” as defined in the JOBS Act, and our independent registered
public accounting firm is not required to attest to the effectiveness of our internal controls over financial reporting for the year
ending December 31, 2015. Implementation of internal controls over financial reporting can be time-consuming, costly and
complicated . If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a
timely basis and our financial stateme nts may be materially misstated . If we identify material weaknesses in our internal controls
over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to
assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is
unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose
confidence in the accuracy and completeness of our financial reports, and the market price of our common stock could be
negatively affected. In addition, we could become subject to investigations by the stock exchange on which our securities are
listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
If
our
estimates
relating
to
our
critical
accounting
policies
are
based
on
assumptions
or
judgments
that
change
or
prove
to
be
incorrect,
our
operating
results
could
fall
below
expectations
of
financial
analysts
and
investors,
resulting
in
a
decline
in
our
stock
price.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates,
assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. We
base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity,
revenue and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if our
assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to
fall below the expectations of financial analysts and investors, resulting in a decline in our stock price. Significant assumptions
and estimates used in preparing our consolidated financial statements include those related to revenue recognition, stock-based
compensation and income taxes.
Impairment
of
goodwill
and
other
intangible
assets
would
result
in
a
decrease
in
earnings.
Current accounting rules require that goodwill and other intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually. These rules also require that intangible assets with definite
useful lives be amortized over their respective estimated useful lives to their estimated residual values, and
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reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Events and circumstances considered in determining whether the carrying value of amortizable intangible assets and
goodwill may not be recoverable include, but are not limited to, significant changes in performance relative to expected operating
results, significant changes in the use of the assets, significant negative industry or economic trends, or a significant decline in our
stock price and/or market capitalization for a sustained period of time. To the extent such evaluation indicates that the useful lives
of intangible assets are different than originally estimated, the amortization period is reduced or extended and the quarterly
amortization expense is increased or decreased. Any impairment charges or changes to the estimated amortization periods could
have a material adverse effect on our financial results.
Risks
Related
to
Our
Intellectual
Property
We
have
been
sued
by
third
parties
for
alleged
infringement
of
their
proprietary
rights
and
may
be
sued
in
the
future.
There is considerable patent and other intellectual property development activity in our industry. Our success depends in
part on not infringing the intellectual property rights of others. From time to time, our competitors or other third parties have
claimed, and we expect they will continue in the future to claim, that we are infringing their intellectual property rights, and we
may be found to be infringing such rights.
On November 14, 2012, Good Technology filed a lawsuit against us in federal court in the Northern District of
California alleging false and misleading representations concerning their products and infringement of four patents held by them.
In the complaint, Good Technology sought unspecified damages, attorney’s fees and a permanent injunction. On March 1, 2013,
we counterclaimed against Good Technology for patent infringement of one of our patents, seeking similar relief. On October 13,
2014, the court issued a claims construction order. Good Technology responded by filing additional patent infringement suits
against us in Delaware, the UK and Germany, as well as inter partes review proceedings. In each of these proceedings, Good
Technology sought to invalidate our patents and/or receive injunctive relief, as well as attorney’s fees. We counterclaimed against
Good Technology in the Delaware case on two of our next generation patents and sought relief similar to what Good Technology
was seeking in that case. The Delaware case was transferred to the Northern District of California on March 27, 2015. On June
30, 2015, the court in the original Northern District of California case issued a summary judgment order invalidating the asserted
claims of one of Good Technology’s patents and holding that we did not infringe that patent as a matter of law. On August 4,
2015, a jury in the original Northern District of California case found that two of the three remaining Good Technology patents
that were asserted in the case were invalid and that we did not infringe any of the three patents. The jury also found that while
Good Technology did not infringe our asserted patent, our patent was not invalid. As a result, neither we nor Good Technology
was awarded damages in the case.
On November 2, 2015, Blackberry announced that it had acquired Good Technology. On December 1, 2015, we and
Good Technology announced a settlement of the global litigation between us, which included a narrow, non-material license
agreement between us and Good Technology and a mutual dismissal of claims.
In the future, we may receive additional claims that our solutions infringe or violate the claimant’s intellectual property
rights. However, we may be unaware of the intellectual property rights of others that may cover some or all of our solutions. Any
claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay
substantial damages or ongoing royalty payments, prevent us from offering our solutions, or require that we comply with other
unfavorable terms. If any of our customers are sued, we would in general be required to defend and/or settle the litigation on their
behalf. In addition, if we are unable to obtain licenses or modify our solutions to make them non-infringing, we might have to
refund a portion of perpetual license fees paid to us and terminate those agreements, which could further exhaust our resources. In
addition, we may pay substantial settlement amounts or royalties on future solution sales to resolve claims or litigation, whether
or not legitimately or successfully asserted against us. Even if we were to prevail in the actual or potential claims or litigation
against us, any claim or litigation regarding our intellectual property could be costly and time-consuming and divert the attention
of our management and key personnel from our business operations. Such disputes, with or without merit, could also cause
potential customers to refrain from purchasing our solutions or otherwise cause us reputational harm.
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We have been sued by non-practicing entities, or NPEs, for patent infringement in the past and may be sued by NPEs in
the future. While we have settled such litigation in the past, these lawsuits, with or without merit, require management attention
and can be expensive.
If
we
are
unable
to
protect
our
intellectual
property
rights,
our
competitive
position
could
be
harmed
or
we
could
be
required
to
incur
significant
expenses
to
enforce
our
rights.
Our ability to compete effectively is dependent in part upon our ability to protect our proprietary technology. We protect
our proprietary information and technology through licensing agreements, third-party nondisclosure agreements and other
contractual provisions, as well as through patent, trademark, copyright and trade secret laws in the United States and similar laws
in other countries. There can be no assurance that these protections will be available in all cases or will be adequate to prevent our
competitors from copying, reverse engineering or otherwise obtaining and using our technology, proprietary rights or solutions.
The laws of some foreign countries, including countries in which our solutions are sold, may not be as protective of intellectual
property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate.
In addition, third parties may seek to challenge, invalidate or circumvent our patents, trademarks, copyrights and trade secrets, or
applications for any of the foregoing. There can be no assurance that our competitors will not independently develop technologies
that are substantially equivalent or superior to our technology or design around our proprietary rights. In each case, our ability to
compete could be significantly impaired.
To prevent substantial unauthorized use of our intellectual property rights, it may be necessary to prosecute actions for
infringement and/or misappropriation of our proprietary rights against third parties. Any such action could result in significant
costs and diversion of our resources and management’s attention, and there can be no assurance that we will be successful in such
action.
Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to
enforce their intellectual property rights than we do. Accordingly, despite our efforts, we may not be able to prevent third parties
from infringing upon or misappropriating our intellectual property.
Our
use
of
open
source
software
could
impose
limitations
on
our
ability
to
commercialize
our
solutions.
Our solutions contain software modules licensed for use from third-party authors under open source licenses, including
the GNU Public License, the GNU Lesser Public License, the Apache License and others. Use and distribution of open source
software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide
warranties or other contractual protections regarding infringement claims or the quality of the code. Some open source licenses
contain requirements that we make available source code for modifications or derivative works we create based upon the type of
open source software we use. If we combine our proprietary solutions with open source software in a certain manner, we could,
under certain of the open source licenses, be required to release the source code of our proprietary solutions to the public or offer
our solutions to users at no cost. This could allow our competitors to create similar solutions with lower development effort and
time and ultimately could result in a loss of sales for us.
The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses
could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our
solutions. In such event, we could be required to seek licenses from third parties in order to continue offering our solutions, to re-
engineer our solutions or to discontinue the sale of our solutions in the event re-engineering cannot be accomplished on a timely
basis, any of which could materially and adversely affect our business and operating results.
Risks
Related
to
Our
International
Operations
Our
international
operations
expose
us
to
additional
business
risks,
and
failure
to
manage
these
risks
may
adversely
affect
our
international
revenue.
We derive a significant portion of our revenues from customers outside the United States. For the year ended December
31, 2015, 2014 and 2013 50%, 45 %, and 44 % of our revenue, respectively, was attributable to our
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international customers, primarily those located in EMEA. As of December 31, 2015, approximately 36 % of our employees were
located abroad.
We expect that our international activities will be dynamic over the foreseeable future as we continue to pursue
opportunities in international markets, which will require significant management attention and financial resources. Therefore, we
are subject to risks associated with having worldwide operations.
We have a limited history of marketing, selling and supporting our solutions internationally. As a result, we must hire
and train experienced personnel to staff and manage our foreign operations. To the extent that we experience difficulties in
recruiting, training, managing and retaining an international staff, and specifically staff related to sales and engineering, we may
experience difficulties in foreign markets. In addition, business practices in the international markets that we serve may differ
from those in the United States and may require us to include non-standard terms in customer contracts, such as extended
warranty terms. To the extent that we may enter into customer contracts in the future that include non-standard terms related to
payment, warranties or performance obligations, our operating results may be adversely affected. International operations are
subject to other inherent risks, and our future results could be adversely affected by a number of factors, including:
— difficulties in executing an international channel partners strategy;
— heightened concerns and legal requirements relating to data and privacy, as evidenced by the European Court of
Justice’s invalidation of the EU Safe Harbor framework in October 2015;
— burdens of complying with a wide variety of foreign laws;
— unfavorable contractual terms or difficulties in negotiating contracts with foreign customers or channel partners as a
result of varying and complex laws and contractual norms;
— difficulties in providing support and training to channel partners and customers in foreign countries and languages;
— heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales
arrangements that may impact financial results or result in fines and penalties;
— difficulties and costs of attracting and retaining employees and managing foreign operations
— import restrictions and the need to comply with export laws;
— difficulties in protecting intellectual property;
— difficulties in enforcing contracts and longer accounts receivable payment cycles;
— the effect of foreign exchange fluctuations on the competitiveness of our prices;
— potentially adverse tax consequences;
— the increased cost of terminating employees in some countries; and
— variability of foreign economic, political and labor conditions.
As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and
manage effectively these and other risks associated with our international operations. Our failure to manage any of these risks
successfully could harm our international operations and reduce our international sales, adversely affecting our business,
operating results and financial condition.
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We
rely
on
channel
partners
to
sell
our
solutions
in
international
markets,
the
loss
of
which
could
materially
reduce
our
revenue.
We sell our solutions in international markets almost entirely through channel partners. We believe that establishing and
maintaining successful relationships with these channel partners is, and will continue to be, critical to our financial success.
Recruiting and retaining qualified channel partners and training them to be knowledgeable about our solutions requires significant
time and resources. In some countries, we rely on a sole or very few channel partners and thus the loss of the channel partner
could have a significant impact on our sales and support in those countries. To develop and expand our distribution channel, we
must continue to scale and improve our processes and procedures that support our channel, including investment in systems and
training. In particular, foreign-based service provider partners are large and complex businesses, and we may have difficulty
negotiating and building successful business relationships with them.
In addition, existing and future channel partners will only partner with us if we are able to provide them with competitive
offerings on terms that are commercially reasonable to them. If we fail to maintain the quality of our solutions or to update and
enhance them or to offer them at competitive discounts, existing and future channel partners may elect to partner with one or
more of our competitors. In addition, the terms of our arrangements with our channel partners must be commercially reasonable
for both parties. If we are unable to reach agreements that are beneficial to both parties, then our channel partner relationships will
not succeed. In addition, international channel partners often rely on business models that favor our on premises product over our
cloud product because in the former, the channel partner may host and manage the software for, and provide additional
administrative, support, training and other services to, the mutual customer for additional fees. This situation could impede sales
of our cloud product in certain international markets.
If we fail to maintain relationships with our channel partners, fail to develop new relationships with other channel
partners in new markets, fail to manage, train or incentivize existing channel partners effectively, or fail to provide channel
partners with competitive solutions on terms acceptable to them, or if these partners are not successful in their sales efforts, our
revenue may decrease and our operating results could suffer.
We have no long-term contracts or minimum purchase commitments with any of our channel partners, and our contracts
with channel partners do not prohibit them from offering solutions that compete with ours, including solutions they currently offer
or may develop in the future and incorporate into their own systems. Some of our competitors may have stronger relationships
with our channel partners than we do, and we have limited control, if any, as to whether those partners sell our solutions, rather
than our competitors’ solutions, or whether they devote resources to market and support our competitors’ solutions, rather than
our solutions. Our failure to establish and maintain successful relationships with channel partners could materially adversely
affect our business, operating results and financial condition.
Failure
to
comply
with
the
U.S.
Foreign
Corrupt
Practices
Act
and
similar
laws
associated
with
our
activities
outside
the
United
States
could
subject
us
to
penalties
and
other
adverse
consequences.
A significant portion of our revenues is and will continue to be from jurisdictions outside of the United States. As a
result, we are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, which generally prohibits U.S. companies and their
intermediaries from making payments to corrupt foreign officials for the purpose of obtaining or keeping business or otherwise
obtaining favorable treatment, and requires companies to maintain adequate record-keeping and internal accounting practices to
accurately reflect the transactions of the company. The FCPA applies to companies, individual directors, officers, employees and
agents. Under the FCPA, we may be held liable for actions taken by strategic or local partners or representatives. In addition, the
government may seek to hold us liable for successor liability FCPA violations committed by companies that we acquire.
In many foreign countries, particularly in countries with developing economies, including many countries in which we
operate, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by
the FCPA or other similar laws and regulations. Although we have contractual provisions in our agreements with channel partners
that require them to comply with the FCPA and similar laws, we have not engaged in formal FCPA training of our channel
partners. Our channel partners could take actions in violation of our policies, for
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which we may be ultimately held responsible. Our development of infrastructure designed to identify FCPA matters and monitor
compliance is at an early stage. If we or our intermediaries fail to comply with the requirements of the FCPA or other anti-
corruption laws, governmental authorities in the U.S. or elsewhere could seek to impose civil and/or criminal penalties, which
could have a material adverse effect on our business, results of operations, financial conditions and cash flows.
We
are
subject
to
export
controls,
and
our
customers
and
channel
partners
are
subject
to
import
controls.
Certain of our solutions are subject to U.S. export controls and may be exported to certain countries outside the U.S. only
by first obtaining an export license from the U.S. government, or by utilizing an existing export license exception, or after
clearing U.S. government agency review. Obtaining the necessary export license or accomplishing a U.S. government review for
a particular export may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export
control laws and economic sanctions prohibit the shipment of certain solutions to U.S. embargoed or sanctioned countries,
governments and persons. If we were to fail to comply with U.S. export law requirements, U.S. customs regulations, U.S.
economic sanctions or other applicable U.S. laws, we could be subject to substantial civil and criminal penalties, including fines,
incarceration for responsible employees and managers and the possible loss of export or import privileges. U.S. export controls,
sanctions and regulations apply to our channel partners as well as to us. Any failure by our channel partners to comply with such
laws, regulations or sanctions could have negative consequences, including reputational harm, government investigations and
penalties.
In addition, various countries regulate the import of certain encryption and other technology by requiring an import
permit, authorization, pre-classification, import certification and/or an import license. Some countries have enacted laws that
could limit our customers’ ability to implement our solutions in those countries.
Changes in our solutions or changes in export and import regulations may create delays in the introduction of our
solutions into international markets, prevent our customers with international operations from deploying our solutions globally or,
in some cases, prevent the export or import of our solutions to certain countries, governments or persons altogether. In addition,
any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing
regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in
decreased use of our solutions by, or in our decreased ability to export or sell our solutions to, existing or potential customers with
international operations. Any decreased use of our solutions or limitation on our ability to export or sell our solutions would likely
adversely affect our business, financial condition and operating results.
Risks
Related
to
Ownership
of
Our
Common
Stock
Our
ability
to
use
our
net
operating
losses
to
offset
future
taxable
income
may
be
subject
to
certain
limitations.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that
undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or NOLs, to
offset future taxable income. Our existing NOLs may be subject to limitations arising from previous ownership changes. Future
changes in our stock ownership, some of which are outside of our control, could result in an ownership change. Furthermore, our
ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due
to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or
otherwise be unavailable to offset future income tax liabilities. For these reasons, we may not be able to utilize a material portion
of the NOLs reflected on our balance sheet, even if we attain profitability.
The
price
of
our
common
stock
has
been
and
may
continue
to
be
weak,
and
you
could
lose
all
or
part
of
your
investment.
The trading price of our common stock has declined since our Initial Public Offering, and the shares are thinly traded.
The trading price of our common stock depends on a number of factors, including those described in this “Risk Factors” section,
many of which are beyond our control and may not be related to our operating performance.
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Since shares of our common stock were sold at our initial public offering, our stock price has ranged from as low as
$2.83 to as high as $12.05 through December 31, 2015. These fluctuations could cause you to lose all or part of your investment
in our common stock, because you might be unable to sell your shares at or above the price you paid. Factors that could cause
fluctuations in the trading price of our common stock include the following:
— failure to meet quarterly guidance with regard to revenue , cash flow breakeven or other key metrics;
— price and volume fluctuations in the overall stock market from time to time;
— volatility in the market prices and trading volumes of high technology stocks;
— changes in operating performance and stock market valuations of other technology companies generally, or those in
our industry in particular;
— sales of shares of our common stock by us or our stockholders;
— failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our
company, or our failure to meet these estimates or the expectations of investors;
— announcements by us or our competitors of new products or new or terminated significant contracts, commercial
relationships or capital commitments;
— the public’s reaction to our press releases, other public announcements and filings with the SEC;
— rumors and market speculation involving us or other companies in our industry;
— actual or anticipated changes in our results of operations or fluctuations in our operating results;
— actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape
generally;
— litigation involving us, our industry or both, or investigations by regulators into our operations or those of our
competitors;
— developments or disputes concerning our intellectual property or other proprietary rights;
— announced or completed acquisitions of businesses or technologies by us or our competitors;
— new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
— changes in accounting standards, policies, guidelines, interpretations or principles;
— any major change in our management;
— general economic conditions and slow or negative growth of our markets; and
— other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
In addition, the stock market in general, and the market for technology companies in particular, have experienced
extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those
companies. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our
actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market prices
of particular companies’ securities, securities class action litigation has often
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been instituted against these companies. Litigation of this type has been instituted against us, and could result in substantial costs
and a diversion of our management’s attention and resources.
For example, on May 1, 2015, a class action lawsuit was filed in federal court against the Company and certain of its
officers on behalf of a putative class of all persons who acquired the Company’s securities between February 13, 2015 and April
22, 2015. It asserts claims for violation of Sections 10(b) and 20(a) of the Exchange Act. Additionally, in August 2015, three
class action lawsuits were filed in state court against the Company, certain of its officers, directors, underwriters and investors on
behalf of putative classes of all persons who purchased the Company’s securities traceable to the Company’s IPO. The lawsuits
assert claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act. T he Company intends to defend these lawsuits
vigorously.
If
financial
or
industry
analysts
do
not
publish
research
or
reports
about
our
business,
or
if
they
issue
an
adverse
or
misleading
opinion
regarding
our
stock,
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 financial
analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. I
f any of the analysts who cover us issue an adverse or misleading opinion regarding our stock price, our stock price would likely
decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose
visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Insiders
continue
to
have
substantial
control
over
our
company,
which
could
limit
your
ability
to
influence
the
outcome
of
key
transactions,
including
a
change
of
control.
Our directors, executive officers and each of our stockholders who own greater than 5% of our outstanding common
stock and their affiliates, in the aggregate, own approximately 54 % of the outstanding shares of our common stock as of
December 31 , 2015. As a result, these stockholders, if acting together, will be able to influence or control matters requiring
approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary
transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may
be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of
control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of
a sale of our company and might ultimately affect the market price of our common stock.
We
have
in
the
past
failed,
and
may
in
the
future
fail,
to
meet
our
publicly
announced
guidance
or
other
expectations
about
our
business
and
future
operating
results,
which
has
in
the
past
caused,
and
would
in
the
future
cause,
our
stock
price
to
decline.
We have provided and may continue to provide guidance about our business and future operating results as part of our
press releases, conference calls or otherwise. In developing this guidance, our management must make certain assumptions and
judgments about our future performance. Our business results may vary significantly from such guidance due to a number of
factors, many of which are outside of our control, and which could adversely affect our operations and operating results.
Furthermore, if our publicly announced guidance of future operating results fails to meet expectations of securities analysts,
investors or other interested parties, the price of our common stock would decline.
The
requirements
of
being
a
public
company
may
strain
our
resources,
divert
management’s
attention
and
affect
our
ability
to
attract
and
retain
qualified
board
members.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the
Dodd-Frank Act, the listing requirements of the NASDAQ Global Stock Market and other applicable securities rules and
regulations. Compliance with these rules and regulations may further increase our legal and financial compliance costs, make
some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act
requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results.
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Being a public company has made it more expensive for us to obtain director and officer liability insurance, and we may
be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These and other factors, including
the decline in our stock price and the other risks described in this “Risk Factors” section, could also make it more difficult for us
to attract and retain qualified executive officers and qualified members of our board of directors, particularly to serve on our audit
committee and compensation committee.
We
are
an
“Emerging
Growth
Company,”
and
any
decision
on
our
part
to
comply
only
with
certain
reduced
disclosure
requirements
applicable
to
Emerging
Growth
Companies
could
make
our
common
stock
less
attractive
to
investors.
We are an “emerging growth company,” as defined in the JOBS Act enacted in April 2012, and, for as long as we
continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting
requirements applicable to other public companies, but not to “emerging growth companies,” including, but not limited to, not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, 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 stockholder approval of any golden parachute payments
not previously approved. We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the year
in which we have more than $1.0 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least
$700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than
$1.0 billion in non-convertible debt securities; and (iv) the last day of the year ending after the fifth anniversary of the completion
of our initial public offering. We cannot predict if investors will find our common stock less attractive if we choose to rely on
these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure,
there may be a less active trading market for our common stock and our stock price may be more volatile. For the year ending
December 31, 2015, we continue to qualify as an “emerging growth company” as defined in the JOBS Act.
Our
future
capital
needs
are
uncertain,
and
we
may
need
to
raise
additional
funds
in
the
future.
If
we
require
additional
funds
in
the
future,
those
funds
may
not
be
available
on
acceptable
terms,
or
at
all.
We may need to raise substantial additional capital in the future to:
— fund our operations;
— continue our research and development;
— develop and commercialize new solutions; or
— acquire companies, in-licensed solutions or intellectual property.
Our future funding requirements will depend on many factors, including:
— market acceptance of our solutions;
— the cost of our research and development activities;
— the cost and timing of establishing additional sales, marketing and distribution capabilities;
— the cost and timing of establishing additional technical support capabilities;
— the effect of competing technological and market developments; and
— the market for different types of funding and overall economic conditions.
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Table of Contents
We may require additional funds in the future, and we may not be able to obtain those funds on acceptable terms, or at
all. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if
available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or additional equity
financing that we raise may contain terms that are not favorable to us or our stockholders.
If we do not have, or are not able to obtain, sufficient funds, we may have to delay development or commercialization of
our solutions. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or delay, reduce the
scope of or eliminate some or all of our development programs. We also may have to reduce marketing, customer support or other
resources devoted to our solutions or cease operations. Any of these actions could harm our operating results.
Sales
of
substantial
amounts
of
our
common
stock
in
the
public
markets,
or
the
perception
that
these
sales
might
occur,
could
reduce
the
price
that
our
common
stock
might
otherwise
attain
and
may
dilute
your
voting
power
and
your
ownership
interest
in
us.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales could
occur, could adversely affect the market price of our common stock and may make it more difficult for you to sell your common
stock at a time and price that you deem appropriate. Based on the total number of outstanding shares of our common stock as of
December 31, 2015, we have 81,326,237 shares of common stock outstanding, notwithstanding any potential exercises of our
outstanding stock options.
In the future, we may issue additional shares of common stock, or securities with convertible features into our common
stock, from time to time in connection with our employee equity plans, financings, acquisitions and investments or otherwise.
For example, in the fourth quarter of 2014 we began issuing restricted stock units, or RSUs, to employees, the majority
of which vest quarterly over four years. In the first quarter of 2015 we established the 2015 Executive Bonus Plan and the 2015
Non-Executive Bonus Plan, or “Bonus Plans,” to be settled in our common stock. On February 22, 2016 our Compensation
Committee approved issuance of 1,655,537 shares of common stock under 2015 Non-Executive Bonus Plan. No shares will be
issued under the 2015 Executive Bonus Plan. These and any other issuances could result in substantial dilution to our existing
stockholders and cause the trading price of our common stock to decline.
Certain
provisions
in
our
charter
documents
and
under
Delaware
law
could
limit
attempts
by
our
stockholders
to
replace
or
remove
our
board
of
directors
or
current
management
and
limit
the
market
price
of
our
common
stock.
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:
— our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of
directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill
vacancies on our board of directors;
— our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder, or
holders, controlling a majority of our capital stock would not be able to take certain actions other than at annual
stockholders’ meetings or special stockholders’ meetings called by the board of directors, the chairman of the board,
the chief executive officer or the president;
— our certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of
minority stockholders to elect director candidates;
— stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to
the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage
or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or
otherwise attempting to obtain control of our company; and
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Table of Contents
— our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the ability to
issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to acquire us.
As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a
corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has
held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors
could rely on Delaware law to prevent or delay an acquisition of our company.
O ur executive officers are entitled to accelerated vesting of their stock options pursuant to the terms of their employment
arrangements under certain conditions following a change of control of the Company. In addition to the arrangements currently in
place with some of our executive officers, we may enter into similar arrangements in the future with other officers. Such
arrangements could delay or discourage a potential acquisition of the Company.
Item
1
B.
Unresolved
Staff
Comments
None.
Item
2.
Properties
Our principal executive offices are located in Mountain View, California and include five buildings totaling approximately
123 ,000 square feet under leases expiring from March 2016 to April 2023 . We have additional office locations throughout the
United States and in various international locations, including offices in the United Kingdom, Germany, Netherlands, Japan and
India.
We intend to add new facilities and expand our existing facilities as we add employees and grow our business, and we
believe that suitable additional or substitute space will be available on commercially reasonable terms to meet our future needs.
Item
3.
Legal
Proceedings
The information set forth under “Litigation” in Note 13 contained in the “Notes to Consolidated Financial Statements” in
Item 8, “Financial Statements and Supplementary Data,” of Part II of this Annual Report on Form 10-K is incorporated herein by
reference.
Item
4.
Mine
Safety
Disclosures
Not applicable.
36
Table of Contents
Part
I
I
Item
5.
Market
for
Registrant’s
Common
Equity,
Related
Stockholder
Matters
and
Issuer
Purchases
of
Equity
Securities
Reverse
Stock
Split
On May 27, 2014, we amended and restated our amended and restated certificate of incorporation to effect a seven-for-five
reverse stock split of our common stock and convertible preferred stock. On the effective date of the reverse stock split, (i) each
seven shares of outstanding convertible preferred stock and common stock was reduced to five shares of convertible preferred
stock and common stock, respectively; (ii) the number of shares of common stock issuable under each outstanding option to
purchase common stock was proportionately reduced on a seven-for-five basis; (iii) the exercise price of each outstanding option
to purchase common stock was proportionately increased on a seven-for-five basis; and (iv) corresponding adjustments in the per
share conversion prices, dividend rates and liquidation preferences of the convertible preferred stock were made. All of the share
and per share informat ion referenced throughout this Annual Report on Form 10-K have been retroactively adjusted to reflect
this reverse stock split.
Issuance
of
Common
Stock
and
Use
of
Proceeds
In June 2014, we closed our initial public offering, or IPO, in which we sold 12,777,777 shares of common stock at a price
to the public of $9.00 per share including 1,666,666 shares of common stock sold pursuant to the full exercise of the underwriters’
over-allotment option. The aggregate offering price for shares sold in the offering was approximately $115 million. The offer and
sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statements on Form S-1 (File
Nos. 333-195089), which were declared or became effective on June 12, 2014. The offering commenced as of June 12, 2014 and
did not terminate before all of the securities registered in the registration statement were sold. Morgan Stanley & Co. LLC,
Goldman, Sachs & Co., Deutsche Bank Securities, Barclays, Raymond James, Stifel, Nomura and Blackstone Capital Markets
acted as the underwriters. We raised approximately $102.9 million in net proceeds after deducting underwriting discounts and
commissions of approximately $8. 0 million and other offering expenses of approximately $4.1 million. Upon the closing of the
initial public offering, all shares of our outstanding convertible preferred stock automatically were converted
into 49,646,975 shares of common stock.
There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed
with the SEC on June 12, 2014 pursuant to Rule 424(b). We invested a portion of the funds received in registered money market
fund s and fixed income investments.
Market
Information
Our common stock, $0.0001 par value per share, is listed on the NASD A Q Global Select Market under the symbol
“MOBL” and began public trading on June 12, 2014.
37
Table of Contents
Price
Range
for
our
Common
Stock
The following table sets forth the reported high and low sales prices of our common stock for the periods indicated, as
regularly quoted on The NASDAQ Global Select Market:
Fiscal
2015
Quarters:
Fourth Fiscal Quarter
Third Fiscal Quarter
Second Fiscal Quarter
First Fiscal Quarter
Fiscal
2014
Quarter:
Fourth Fiscal Quarter
Third Fiscal Quarter
Second Fiscal Quarter (from June 12, 2014)
First Fiscal Quarter
Holders
of
Record
and
Dividends
High
Low
$
$
$
$
4.66 $
6.03 $
9.68 $
10.15 $
2.97
2.81
5.69
8.17
11.31 $
12.96 $
11.74 $
$
$
$
$ N/A
8.33
7.64
8.89
$ N/A
As of February 19 , 201 6 , there were 71 holders of record of our common stock. Because many of our shares are held by
brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by
these record holders. We have never declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash
dividends on our capital stock. Any future determination as to the declaration and payment of dividends, if any, will be at the
discretion of our board of directors, subject to applicable laws, and will depend on then existing conditions, including our
financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our
board of directors may deem relevant .
Stock
Performance
Graph
and
Cumulative
Total
Return
The following graph compares the cumulative total return attained by stockholders on our common stock relative to the
cumulative total returns of the NASDAQ Composite Index (^IXIC) and NASDAQ Computer Index (^IXCO). The graph tracks
the performance of a $100 investment in our common stock and in each of the indices (with the
38
Table of Contents
reinvestment of all dividends) from June 12, 2014 to December 31, 201 5 . The stock price performance on the following graph
is not necessarily indicative of future stock price performance.
MobileIron,
Inc.
Comparison
of
Total
Return
Performance
Company/Index
MobileIron, Inc.
Nasdaq Computer Index
Nasdaq Composite Index
Base
Period
6/12/2014
$
95.20 $ 111.40 $
6/30/2014 9/30/2014 12/31/2014 3/30/2015 6/30/2015 9/30/2015 12/31/2015
36.10
118.49
115.83
99.60 $ 92.60 $ 59.10 $ 31.00 $
111.55
109.55
108.07
104.56
102.93
102.58
107.50
106.87
113.19
115.36
112.96
113.37
100.00 $
100.00
100.00
39
Table of Contents
Unregistered
Sales
of
Equity
Securities
In the year ended December 31 , 2015, we repurchased an aggregate of 32,66 7 shares of our common stock from our
employees or departing employees in the aggregate amount of $27,676. These securities were repurchased as follows:
Period
January 1, 2015 through January 31, 2015
February 1, 2015 through February 28, 2015
March 1, 2015 through March 31, 2015
April 1, 2015 through April 30, 2015
May 1, 2015 through May 31, 2015
June 1, 2015 through June 30, 2015
July 1, 2015 through July 31, 2015
August 1, 2015 through August 31, 2015
September 1, 2015through September 30, 2015
October 1, 2015 through October 31, 2015
November 1, 2015 through November 30, 2015
December 1, 2015 through December 31, 2015
Total shares repurchased
Total
number
of
shares
repurchased
Average
price
paid
per
share
5,357 $
3,200
268
14,565
—
—
1,340
7,937
—
—
—
—
32,667 $
1.75
1.55
0.55
0.74
—
—
1.75
0.00
—
—
—
—
0.85
Securities
Authorized
for
Issuance
under
Equity
Compensation
Plans
See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for
issuance under our equity compensation plan.
Item
6.
Selected
Financial
Data
The following selected historical financial data should be read in conjunction with Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” our financial statements, and the related notes appearing in Item 8,
“Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K to fully understand factors that may affect
the comparability of the information presented below.
The statement of operations data for 201 5 , 201 4, 201 3 and 2012 and the balance sheet data as of December 31, 201 5,
201 4 and 2013 are derived from our audited financial statements appearing in Item 8, “Financial Statements and Supplementary
Data,” of this Annual Report on Form 10-K. The balance sh eet data as of December 31, 2013 is derived
40
Table of Contents
from audited financial statements not included in this Annual Report on Form 10-K. Our historical results are not necessarily
indicative of the results to be expected in the future.
(in thousands, except share and per share data)
Consolidated
Statement
of
Operations
Data:
Revenue
Perpetual license
Subscription
Software support and services
Total revenue
Cost of revenue
Perpetual license
Subscription
Software support and services
Total cost of revenue
(1)
Gross profit
Operating expenses
(1)
(1)
Research and development
Sales and marketing
General and administrative
Restructuring charge
Amortization of intangible assets
Impairment of in-process research and development
(1)
Total operating expenses
Operating loss
Other expense - net
Loss before income taxes
Income tax expense
Net loss
Net loss per share, basic and diluted
Weighted-average shares used to compute net loss per share, basic and
diluted
(1) Amounts include stock-based compensation expense as follows:
(in thousands)
Stock-Based
Compensation
Expense:
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total stock-based compensation expense
41
2,881
7,181
18,115
28,177
121,121
61,871
105,520
36,037
1,049
Year
ended
December
31,
2015
2014
2013
2012
$ 53,512 $ 66,816
30,227
35,252
132,295
48,080
47,706
149,298
$ 69,810 $ 26,251
5,617
9,022
105,574 40,890
15,085
20,679
4,448
5,719
13,868
24,035
108,260
3,327 1,930
3,684 2,998
9,489 6,742
16,500 11,670
89,074 29,220
46,278
99,870
22,400
—
—
—
782
—
204,477
(83,356)
274
(83,630)
852
$ (84,482)
(1.07)
$
169,330
(61,070)
302
(61,372)
517
$ (61,889)
(1.30)
$
36,400 23,773
68,309 45,979
12,081 7,223
—
—
52
208
3,925
—
120,923 77,027
(31,849) (47,807)
396
137
(32,245) (47,944)
252 (1,433)
$ (32,497) $ (46,511)
(6.04)
$
(3.27) $
78,755
47,517
9,953 7,696
Year
ended
December
31,
2015
2014
2013
2012
$
2,774
10,607
9,508
5,902
$ 28,791
$
1,353 $
5,980
5,930
3,363
$ 16,626 $
327 $
5,238
1,893
931
8,389 $
173
2,565
1,063
483
4,284
Table of Contents
(in thousands)
Consolidated
Balance
Sheet
Data:
Cash and cash equivalents
Short-term and long-term investments
Working capital
Total assets
Total deferred revenue
Short-term borrowings
Convertible preferred stock
Accumulated deficit
Total stockholders' equity (deficit)
42
As
of
December
31,
2015
2014
2013
2012
— $
73,573 $ 38,692
47,234 $ 104,287 $
$
—
36,089 $
51,670 $
$
$
49,054 $ 13,132
90,448 $
66,568 $
$ 161,114 $ 191,842 $ 111,259 $ 71,454
40,751 $ 45,500
54,174 $
$
— $
$
—
4,300 $
$
— $ 160,259 $ 102,552
$ (275,205) $ (190,723) $ (128,834) $ (96,337)
68,139 $ 115,094 $ (109,825) $ (87,421)
$
69,875 $
— $
— $
Table of Contents
Item
7.
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
our
financial
statements
and
related
notes
appearing
elsewhere
in
this
Annual
Report
on
Form
10-K.
In
addition
to
historical
financial
information,
the
following
discussion
contains
forward-looking
statements
that
reflect
our
plans,
estimates
and
beliefs.
Our
actual
results
could
differ
materially
from
those
contained
in
or
implied
by
any
forward-looking
statements.
Factors
that
could
cause
or
contribute
to
these
differences
include
those
under
“Risk
Factors”
included
in
Part
I,
Item
1A
or
in
other
parts
of
this
report.
Overview
We invented a purpose-built mobile IT platform for enterprises to secure and manage mobile applications, or apps, content
and devices while providing their employees with device choice, privacy and a native user experience. Customers use our
platform as the technology foundation in their journey to become “Mobile First” organizations, embracing mobility as a primary
computing platform for their employees. Mobile First organizations transform their businesses by giving their employees secure
access to critical business applications and content on devices employees want with a native user experience they love. Our
platform is extensible and fosters a growing ecosystem of application developers and technology partners who augment the
functionality and add value to our platform, creating positive network effects for our customers, our ecosystem and our company.
Our mobile IT platform addresses the requirements across all phases of customers’ journeys to become Mobile First
organizations. It provides value to both end-users and IT departments. End-users get apps and content that they need to get their
job done on the mobile device of their choice with the native device experience. Enterprise IT departments get a security and
management platform that easily integrates into their existing IT or cloud infrastructure and allows them to protect and manage
corporate data and apps, independent of the mobile device, for both corporate-owned, bring your own device, or BYOD, and
mixed device ownership environments.
Our business model is based on winning new customers, expanding sales within existing customers, upselling new products
and renewing subscriptions and software support agreements. We win customers using a sales force that works closely with our
channel partners, including resellers, service providers and system integrators. We have experienced rapid growth in our customer
base, having sold our platform to over 10, 500 customers since 2009. No single end customer accounted for more than 5% of our
total revenue in 2015, one reseller accounted for 16% of our revenue in 2015 .
We derive revenue from sales of our software solutions to custo mers, which are sold either (i) on a perpetual license basis
with annual software support w hen deployed on premise or (ii) on a subscription basis as a cloud service or when deployed on
premise.
Subscription revenue is an increasing portion of our revenue. When we sell our solutions on a subscription basis, we offer
12 months or longer terms and bill in advance, or certain service providers often operate under a monthly recurring charge, or
MRC, model. In the MRC model, revenue and billings are based on active devices or users of the service provider’s customer and
are reported to us by the service provider on a monthly basis over time and billed by us one month in arrears. Thus, under the
MRC model, we receive no billings or revenue for MRC at the time the deal is booked, but instead the MRC is billed and revenue
is recognized each month based on usage reports one month in arrears . Unlike one-year term subscriptions, MRC is not reflected
in deferred revenue. This important difference between MRC billings and perpetual and term subscription billings can lead to
significant variability of billings in a given quarter depending on the type of billing model that the customer chooses and the
overall mix of billing types for all customers within a quarter. We have experienced growth of MRC revenue each quarter since
the first quarter of 2012.
Our total revenue was $149.3 million, $132.3 million and $105.6 million in 2015, 2014 and 2013 , respectively,
representing a growth rate of 13% from 2014 to 2015 and 25% from 2013 to 2014. Growth slowed relative to the prior year,
primarily due to a continuing shift in favor of subscription revenue, including MRC revenue, and a slowdown in perpetual license
orders.
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Table of Contents
Because we had not established vendor specific objective evidence, or VSOE, of fair value of software support and services
prior to January 1, 2013, we recognized perpetual license revenue ratably over the term of the related software support agreement.
Upon establishing vendor specific objective evidence, or VSOE, on January 1, 2013, we began to recognize perpetual license
revenue upon delivery assuming all other revenue recognition criteria have been met. As a result, our total revenue includes
amounts related to licenses delivered in previous years. In 2015, 2014 and 2013, $1.8 million, $5.2 million and $21.1 million,
respectively, was recognized as revenue from perpetual licenses that were delivered prior to 2013. Excluding revenue from
perpetual licenses delivered prior to 2013, our total revenue was $147.5 million, $127.1 million and $84.5 million in 2015, 2014
and 2013 respectively, representing growth of 16% from 2014 to 2015 and 50% from 2013 to 2014.
Revenue from subscription and perpetual licenses represented approximately 32% and 36%, respectively, of total revenue
in 2015. The balance, constituting 32% of total revenue in 2015, was software support and services revenue, including revenue
from agreements to provide software upgrades and updates, as well as technical support, to customers with perpetual software
licenses. When we sell our solutions on a term subscription basis, we generally offer a one-year term and bill customers in
advance. W e recognized 23% of our total revenue from subscriptions, 5 0 % from perpetual licenses and 27% from software
support and services in 2014 and 14% of our total revenue from subscriptions, 66% from perpetual licenses and 20% from
software support and services in 2013. This represents a continuing mix shift in favor of subscription, and in particular MRC
revenue, and softwar e support and services revenue. Like the portion of subscription revenue that is generally billed annually in
advance, our MRC revenue has continued to grow as a percentage of total revenue, comprising approximately 14%, 9% and 6%
in 2015, 2014 and 2013 , respectively .
Our perpetual license revenue was $53.5 million, $66.8 million and $69.8 million in 2015, 2014 and 2013, respectively,
representing a decrease of 20% from 2014 to 2015 and 4% from 2013 to 2014 . The 2015 decline in perpetual license revenue was
primarily due to a continuing mix shift in favor of software licenses priced as subscriptions, including MRC, rather than perpetual
licenses, and a slowdown in expansion orders. The decline in perpetual license revenue was also attributable to decreases of $3.4
million from 2014 to 2015 in revenue recognized from licenses that were delivered prior to 2013, for which the revenue is being
recognized ratably over the contractual terms of the related software support agreements due to lack of VSOE for software
support and services prior to January 1, 2013.
Our subscription revenue was $48.1 million, $30.2 million and $15.1 million in 2015, 2014 and 2013 respectively,
representing growth of 59% from 2014 to 2015 and 100% from 2013 to 2014 . While we expect subscription revenue to generally
increase as new and existing customers continue to purchase subscription software licenses, we also expect potential quarterly
volatility in both billings and revenue as a result of mix changes between perpetual, term subscription and MRC deals.
Our software support and services revenue was $47.7 million, $35.3 million and $20.7 million in 2015, 2014 and 2013
respectively, representing growth of 35% from 2014 to 2015 and 70% from 2013 to 2014 . Because the perpetual license revenue
growth rate slowed, the software support and services revenue growth rate slowed as well.
Our gross billings were $165. 0 million, $145.7 million and $100.8 million in 2015, 2014 and 2013, respectively,
representing growth rates of 13% from 2014 to 2 015 and 45% from 2013 to 2014. The slowing of gross billings growth in 2015
was due to the same reas ons as noted above for revenue.
We sell a significant portion of our products through our channel partners, including resellers, service providers and system
integrators. Our sales force develops sales opportunities and works closely with our channel partners to sell our solutions. We
have a high touch sales force focused on the large organizations , inside sales teams focused on mid-sized enterprises and sales
teams that work with service providers that focus on smaller businesses. We prioritize our internal sales and marketing efforts on
large organizations because we believe that they represent the largest potential opportunity.
We believe that our market opportunity is large, and sales to customers outside of the United States will remain a
significant opportunity for future growth. In 2015, 2014 and 2013, 50%, 45% and 44% of our total revenue, respectively, was
generated from customers located outside of the United States, primarily those located in Europe. International market trends that
may affect sales of our products and services include heightened concerns and legal requirements
44
Table of Contents
relating to data security and privacy, the importance of execution on our international channel partners strategy, the importance of
recruiting and retaining sufficient international personnel and the effect of exchange rates.
Over the past year, we have significantly increased our expenditures to support the development and expansion of our
business, which has resulted in continuing losses. We incurred net losses of $84.5 million, $61.9 million and $32.5 million in
2015, 2014 and 2013, respectively. As a result of this, we do not expect to be profitable for the foreseeable future under our
current operating plan. Future profitability is dependent on revenue growth, which may be challenging for a number of reasons
including a continued mix shift towards MRC and other subscription licensing, increasing and entrenched competition, changes in
our pricing model, or any failure to capitalize on market opportunities. In addition, we will need to increase operating efficiency,
which may be challenging given the rate of technology change, our operational complexity, and the expenses associated with
being a public company.
In 2015, we incurred $10.5 million in litigation expense, almost all of which related to our patent litigation with Good
Technology, which we settled in November 2015. The settlement included a mutual dismissal of all claims and an immaterial
license agreement.
In June 2014, we completed our initial public offering, or our IPO in which we issued and sold 12,777,777 shares of
common stock, including 1,666,666 million shares of common stock sold pursuant to the full exercise of the underwriters’ over-
allotment option, at a price of $9.00 per share. We received aggregate proceeds of $107.0 million from the sale of shares of
common stock, net of underwriters’ discounts and commissions, but before deducting offering expenses of approximately $4.1
million.
Key
Metrics
and
Non-GAAP
Financial
Information
To supplement our financial results presented on a GAAP basis, we provide investors with certain non-GAAP financial
measures, including gross billings, recurring billings, non-GAAP revenue, recurring revenue, non-GAAP gross profit, non-GAAP
gross margin, non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, and non-GAAP net loss per share.
These non-GAAP financial measures exclude stock-based compensation, the amortization of intangible assets, impairment of in-
process research and development , restructuring charges and perpetual license revenue recognized from li censes delivered prior
to 2013.
Perpetual
license
revenue
recognized
from
licenses
delivered
prior
to
2013
In our non-GAAP financial measures, we have excluded the effect of perpetual license revenue recognized from licenses
delivered prior to 2013 from revenue, gross profit, gross margin, operating loss, operating margin, net loss, and net loss per share.
Because we had not established vendor specific objective evidence, or VSOE, of the fair value of software support and services
prior to January 1, 2013, we recognized perpetual license revenue ratably over the term of the related software support agreement.
Upon establishing VSOE on January 1, 2013, we began to recognize perpetual license revenue upon delivery assuming all other
revenue recognition criteria are met. As a result, our perpetual license GAAP revenue includes amounts related to licenses
delivered prior to 2013. Revenue amortizing from these perpetual licenses delivered prior to 2013 has declined over each quarter
since the quarter ended March 31, 2013 and will continue to decline sequentially until it is fully amortized. As of December 31,
2015, the amount of unrecognized deferred revenue associated with perpetual licenses delivered prior to January 1, 2013 was
approximately $300,000, the significant majority of which is expected to be recognized in 2016.
Stock-based
compensation
expenses
In our non-GAAP financial measures, w e have excluded the effect of stock-based compensation expenses. Stock-based
compensation expenses will recur in future periods.
Restructuring
charges
In our non-GAAP financial measures, we have excluded the effect of the severance and other expenses related to our
reduction in workforce. Restructuring charges may recur in the future; however, the timing and amounts are difficult to predict.
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Table of Contents
Amortization
of
intangible
assets
In our non-GAAP financial measures, w e have excluded the effect of amortization of intangible assets. Amortization of
intangible assets is significantly affected by the timing and size of our acquisitions. Amortization of intangible assets will recur in
future periods.
Impairment
of
in-process
research
and
development
In 2013, we recorded an impairment loss of $3.9 million against the entire recorded in-process research and development,
or IPR&D balance associated with our acquisition of Push Computing, Inc. We have excluded the effect of the impairment charge
from our non-GAAP financial measures. This expense is not expected to recur.
Non-GAAP
revenue,
non-GAAP
gross
profit,
non-GAAP
gross
margin,
non-GAAP
operating
loss,
non-GAAP
operating
margin,
non-GAAP
net
loss,
and
non-GAAP
net
loss
per
share
We believe that the exclusion of perpetual license revenue recognized from licenses delivered prior to 2013, stock-based
compensation expense, restructuring charges and amortization of intangible assets from revenue, gross profit, gross margin,
operating loss, operating margin, net loss, and net loss per share provides useful measures for management and investors because
1) revenue recognized from licenses delivered prior to 2013 has and will continue to significantly decline over t ime until it is
fully amortized and 2) s tock-based compensation, amortization of intangible assets and restructuring charges have been and can
continue to be inconsistent in amount from period to period. We believe the inclusion of these items makes it difficult to compare
periods and understand the growth and performance of our business. In addition, we evaluate our business performance and
compensate management based in part on these non-GAAP measures. There are limitations in using non-GAAP financial
measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-
GAAP financial measures used by our competitors and exclude expenses that may have a material impact on our reported
financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a
significant recurring expense in our business and an important part of the compensation provided to our employees. Similarly,
amortization of intangible assets has been and will continue to be a recurring expense.
Gross
and
recurring
billings,
recurring
revenue
and
free
cash
flow
Our non-GAAP financial measures also include: gross billings, which we define as total revenue plus the change in
deferred revenue in a period; recurring billings, which we define as total revenue less perpetual license, hardware, and
professional services revenue plus the change in deferred revenue for subscription and software support arrangements in a period,
adjusted for nonrecurring perpetual license billings; recurring revenue, which we define as total revenue less perpetual license,
hardware, professional services and perpetual amounts recorded as subscription or software support revenue in multiple elements
arrangements; and free cash flow, which we define as cash used in operating activities less the amount of property and equipment
purchased. We consider gross billings to be a useful metric for management and investors because subscription billings,
excluding MRC, and software support and services billings drive deferred revenue, which is an important indicator of future
revenue. Similarly, we consider recurring billings and recurring revenue to be useful metrics because they are important
indicators of the portion of our business that we would expect to recur each year. There are a number of limitations related to the
use of gross, recurring billings and recurring revenue. First, gross and recurring billings include amounts that have not yet been
recognized as revenue. Second, our calculation of gross and recurring billings may be different from other companies that report
similar financial measures. Third, recurring revenue excludes perpetual license amounts recognized from multiple elements
arrangements that we record as subscription or software support revenue in our GAAP statements of operations and that perpetual
license amount is based on invoice value, not fair value, although we believe invoice value approximates the fair value of the
element. Fourth, in the MRC model, revenue and billings are based on active devices or users of the service provider’s customer
and are billed to us by the service provider on a monthly basis over time and one month in arrears. Thus, under the MRC model ,
we receive no billings or revenue for MRC at the time the deal is booked, but instead the MRC is billed and revenue is recognized
each month based on active usage. Unlike term subscriptions, MRC is not reflected in deferred revenue. This important difference
between MRC billings and perpetual and term subscription billings can lead to significant variability of billings in a given quarter
depending on the type of billing model that the customer chooses and the overall mix of billing types for all customers within a
quarter. We compensate for these limitations by providing specific information regarding GAAP revenue and evaluating gross
and recurring billings and recurring revenue together
46
Table of Contents
with revenue calculated in accordance with GAAP. Management believes that information regarding free cash flow provides
investors with an important perspective on the cash available to invest in our business and fund ongoing operations. However, our
calculation of free cash flow may not be comparable to similar measures used by other companies.
We believe these non-GAAP financial measures are helpful in understanding our past financial performance and our future
results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP
measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate
our business, and make operating decisions. These non-GAAP measures are among the primary factors management uses in
planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business
based on certain of these non-GAAP measures.
We monitor the following non-GAAP financial measures:
(in thousands, except percentages and per share data)
Non-GAAP total revenue
Year-over-year percentage increase
Gross billings
Year-over-year percentage increase
Recurring billings
Percentage of gross billings
Year-over-year percentage increase
Recurring revenue
Percentage of Non-GAAP total revenue
Year-over-year percentage increase
Non-GAAP gross profit
Non-GAAP gross margin
Non-GAAP operating loss
Non-GAAP operating margin
Non-GAAP net loss
Non-GAAP net loss per share
Free cash flow
47
45 %
50 %
13 %
16 %
90,563
65 %
37 %
54 %
73 %
For
the
year
ended
December
31,
2013
2014
2015
$ 84,525
$ 127,081
$ 147,456
107 %
$ 164,999 $ 145,718 $ 100,825
48 %
$ 107,485 $ 78,601 $ 45,395
45 %
99 %
33,505
40 %
n/a
$ 122,923 $ 105,047 $ 68,628
81.2 %
$ (54,488) $ (48,228) $ (40,099)
(47.4)%
$ (55,614) $ (49,047) $ (40,747)
$
(4.09)
$ (52,265) $ (39,688) $ (27,794)
61 %
49 %
48 %
81 %
(37.0)%
(38.0)%
60,777
83.4 %
82.7 %
(1.03) $
(0.70) $
Table of Contents
Reconciliation of Non-GAAP Financial Measures
The following tables reconcile the most directly comparable GAAP financial measure to each of the non-GAAP financial
measures discussed above.
(in thousands, except percentages and per share data)
Non-GAAP
total
revenue
reconciliation:
GAAP total revenue
Subtract: Perpetual license revenue recognized from licenses delivered prior to
2013
Non-GAAP
total
revenue:
Gross
billings
reconciliation:
Total revenue
Total deferred revenue, end of period
Less: Total deferred revenue, beginning of period
Change in total deferred revenue
(1)
Gross
billings
For
the
year
ended
December
31,
2015
2014
2013
$ 149,298
$ 132,295
$ 105,574
(1,842)
$ 147,456
(5,214)
$ 127,081
(21,049)
$ 84,525
.
$ 149,298
69,875
(54,174)
15,701
$ 164,999
$ 132,295
54,174
(40,751)
13,423
$ 145,718
$ 105,574
40,751
(45,500)
(4,749)
$ 100,825
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Table of Contents
For
the
year
ended
December
31,
2013
2014
2015
(in thousands, except percentages and per share data)
Recurring
billings
reconciliation:
Total revenue
Less: Perpetual license revenue
Less: Professional services revenue
Subscription and software support deferred revenue, end of period
Less: Subscription and software support deferred revenue, beginning of period
Change in total subscription and software support deferred revenue
Less: Adjustments
(2)
(1)
Recurring
billings
Recurring
revenue
reconciliation:
Total revenue
Less: Perpetual license revenue
Less: Professional services revenue
Less: Perpetual license recorded over the term of subscription or software support
(4)
Recurring
revenue:
Non-GAAP
gross
profit
reconciliation:
Gross profit
Add: Stock-based compensation expense
Add: Amortization of intangible assets
Subtract: Perpetual license revenue recognized from licenses delivered prior to
2013
Non-GAAP
gross
profit
Non-GAAP
gross
margin
reconciliation:
GAAP gross margin: GAAP gross profit over GAAP total revenue
GAAP to non-GAAP gross margin adjustments
Non-GAAP
gross
margin
Non-GAAP
operating
loss
reconciliation:
GAAP operating loss
Add: Stock-based compensation expense
Add: Amortization of intangible assets and impairment of IPR&D
Add: Restructuring charges
Subtract: Perpetual license revenue recognized from licenses delivered prior to
(3)
2013
Non-GAAP
operating
loss
Non-GAAP
operating
margin
reconciliation:
GAAP operating margin: GAAP operating profit over GAAP total revenue
GAAP to non-GAAP operating margin adjustments
Non-GAAP
operating
margin
49
(3,165)
$ 149,298 $ 132,295 $ 105,574
(53,512) (66,816) (69,810)
(1,483)
(2,404)
67,267 49,194 30,468
(49,194)
(14,712)
(30,468)
18,073 18,726 15,756
(4,642)
$ 107,485 $ 78,601 $ 45,395
(3,209)
(3,200)
149,298
(53,512)
(3,165)
132,295 105,574
(69,810)
(66,816)
(1,483)
(2,404)
(2,058)
(2,298)
$ 90,563 $ 60,777
(776)
33,505
$ 121,121 $ 108,260 $ 89,074
327
276
648
870
2,774
1,353
(1,842)
(21,049)
$ 122,923 $ 105,047 $ 68,628
(5,214)
81.1 %
2.3 %
83.4 %
81.8 %
0.9 %
82.7 %
84.4 %
(3.2)%
81.2 %
$ (83,356) $ (61,070) $ (31,849)
8,389
16,626
28,791
4,410
—
1,430
—
1,049
870
(1,842)
(21,049)
$ (54,488) $ (48,228) $ (40,099)
(5,214)
(55.8)%
18.8 %
(37.0)%
(46.2)%
8.2 %
(38.0)%
(30.2)%
(17.2)%
(47.4)%
Table of Contents
(in thousands, except percentages and per share data)
Non-GAAP
net
loss
reconciliation:
GAAP net loss
Add: Stock-based compensation expense
Add: Amortization of intangible assets and impairment of IPR&D
Add: Restructuring charges
Subtract: Perpetual license revenue recognized from licenses delivered prior to
2013
(3)
Non-GAAP
net
loss
Non-GAAP
net
loss
per
share
reconciliation:
GAAP net loss per share
Add: Stock-based compensation expense
Add: Amortization of intangible assets and impairment of IPR&D
Add: Restructuring charges
Subtract: Perpetual license revenue recognized from licenses delivered prior to
2013
(3)
Non-GAAP
net
loss
per
share
Free
cash
flow:
Net cash used in operating activities
Purchase of property and equipment
Free
cash
flow
For
the
year
ended
December
31,
2013
2014
2015
$ (84,482)
28,791
870
1,049
$ (61,889)
16,626
1,430
—
$ (32,497)
8,389
4,410
—
(1,842)
(5,214)
$ (55,614) $ (49,047)
(21,049)
$ (40,747)
$
$
(1.07)
0.37
0.01
0.01
$
(1.30)
0.35
0.03
—
(3.27)
0.85
0.44
—
(0.02)
(0.70) $
(0.11)
(1.03)
$
(2.11)
(4.09)
$
$ (48,535)
(3,730)
$ (52,265)
$ (36,569)
(3,119)
$ (39,688)
$ (25,550)
(2,244)
$ (27,794)
(1)
(2)
(3)
(4)
Our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue as of
the period end, including subscription, software support and service revenue paid for in advance by the customer that is
recognized ratably over the contractual service period. As of December 31, 2015 and 2014, $300 ,000 and $2.1 million,
respectively, of our total deferred revenue consisted of license revenue deferred from perpetual licenses sold prior to
January 1, 2013 because we had not established VSOE until that date.
Includes nonrecurring perpetual license billings that consist of the Deferred Portion arising from undelivered elements of
perpetual license arrangements and billings classified under Bundled Arrangements. See Note 1 entitled “Summary of
Significant Accounting Policies—Revenue Recognition” in Item 8, “Financial Statements and Supplementary Data,” of
Part II of this Annual Report on Form 10-K for a description of Deferred Portion and Bundled Arrangements.
Includes an impairment charge of $3.9 million in 2013 related to our in-process research and developme nt intangible
asset. See Note 6 entitled “ Goodwill and Intangibles” in Item 8, “Financial Statement and Supplementary Data,” of Part II
of this Annual Report on Form 10-K.
Perpetual amounts recorded as subscription or software revenue in multiple elements arrangements, where undelivered
elements do not have VSOE.
Factors
Affecting
our
Performance
Market
Adoption
of
Mobile
IT
Platforms
We are affected by the pace at which enterprises adopt mobility into their business processes and purchase and expand a
mobile IT platform. Because our prospective customers often do not have a separate budget for mobile IT products, we invest in
marketing efforts to increase market awareness, educate prospective customers and drive adoption of our platform. The degree to
which prospective customers recognize the mission-critical need for mobile IT solutions and deploy mobile apps to enhance
employee productivity will determine the customer demand for our solutions.
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Table of Contents
Investment
in
our
Mobile
IT
Platform
Ecosystem
We have invested, and intend to continue to invest, in expanding the breadth and depth of our mobile IT ecosystem. We
expect to invest in research and development to enhance the application and technology integration capabilities of our platform .
We are also enhancing our solution to allow native apps written to operating systems specifications to be seamlessly integrated.
The deg ree to which we expand our base of ecosystem partners will increase the value of our platform for our customers, which
could lead to an increased number of new customers as well as renewals and follow-on sales opportunities.
Ability
to
Improve
and
Grow
Our
Worldwide
Sales
Channels
We have invested, and intend to continue to invest, in improving our sales operations to drive additional revenue and
support the growth of our customer base. We work with our channel partners to identify and acquire new customers as well as
pursue follow-on sales opportunities. We need to further leverage our channel by training existing and new partners to
independently sell and support our products. Newly-hired sales personnel typically require several months to become productive
and turnover of productive sales personnel can inhibit our billings and revenue growth. All of these factors will influence timing
and overall levels of sales productivity, impacting the rate at which we will be able to acquire customers to drive revenue growth.
Expansion
and
Upsell
within
Existing
Customer
Base
After the initial sale to a new customer, we focus on expanding our relationship with such customer to sell additional
licenses and subscriptions. To increase our revenue, it is important that our customers expand device license count and purchase
additional products. Additional sales lead to increased revenue over the lifecycle of a customer relationship and can significantly
increase the return on our sales and marketing investments. Accordingly, our revenue growth will depend in part on the degree to
which our expansion and upsell sales strategy is successful.
Mix
of
Subscription
and
Perpetual
Revenue
We offer our solutions on both a subscription and perpetual pricing model. We are seeing broader market acceptance of our
subscription licensing model from new customers. We expect the proportion of subscription revenue to our total revenue to
increase over time and there may be significant increases or decreases on a quarterly basis . In addition, in arrangements where
perpetual and on premise term licenses are sold together, revenue is recognized ratably over the contractual term. Depending on
our product development plans, situations in which perpetual licenses must be recognized as revenue ratably may increase in the
future. Because subscription revenue is recognized ratably over the duration of the related contracts, increases in total revenue
will lag any increase in subscription or combined arrangements.
Ability
to
Scale
Operations
We plan to continue to invest for future growth, in part by making selective investments in research and development and, to
a lesser degree, in sales and marketing. We will continue to incur significant accounting, legal and other expenses in order to
comply with rules and regulations associated with being a public company. At the same time, we will need to increase our
operating efficiency, which may be challenging given our rate of technology change, operational complexity, and expenses
associated with being a public company.
Components
of
Operating
Results
Revenue
Perpetual license revenue
Perpetual license revenue primarily relates to revenue from on premise perpetual licenses. Upon establishing VSOE of
fair value for software support and services on January 1, 2013, we began to recognize perpetual license revenue upon delivery
assuming all other revenue recognition criteria have been met. Prior to that date, we recognized perpetual license revenue ratably
over the contractual term of the related software support agreement. Prior to January 1,
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Table of Contents
2013, we did not have VSOE of fair value for our software-related undelivered elements due to limited history of stand-alone
sales transactions and inconsistency in pricing. We established VSOE of fair value when we had a substantial majority of stand-
alone sales transactions of software support and services arrangements pricing within a narrow pricing band. In our VSOE
analysis, we generally include stand-alone sales transactions entered into during a rolling 12 month period unless a shorter period
is appropriate due to changes in our pricing structure. From time to time, we enter into multiple element arrangements with
customers in which a customer purchases our software with an appliance. Appliance revenues are also included in perpetual
license revenue and constitute less than 10% of total revenue in 2015, 2014 and 201 3 .
Subscription revenue
Subscription revenue is generated primarily from subscriptions to our on- premise term licenses, arrangements where
perpetual and term license subscriptions are bundled together, and subscriptions to our cloud service. These revenues are
recognized ratably over the subscription period or term. While most of our subscriptions have at least a one-year commitment, we
also recognize in this category MRC, which is revenue from month-to-month subscription arrangements that are typically sold
through service providers and billed on a monthly basis , one month in arrears . Except for MRC, we typically bill subscriptions
annually in advance.
Software support and services revenue
Software support and services revenue includes recurring revenue from agreements to provide software upgrades and
updates, as well as technical support, to customers with perpetual software licenses. Revenue related to software support is
recognized ratably over the support term. Software support and services revenue also includes revenue from professional services,
consisting of implementation consulting services and training of customer personnel.
Cost
of
Revenue
Perpetual license
Our cost of perpetual license revenue consists of cost of third-party software royalties , appliances and amortization of
intangible assets .
Subscription
Our cost of subscription revenue primarily consists of costs associated with our data center operations for our cloud
service, our global Technical Support organization and third-party software royalties. Cloud service data center costs primarily
consist of third-party hosting facilities , telecommunication and information technology costs. Global Customer Success
organization and data center operations costs primarily consist of salaries, benefits, bonuses, stock-based compensation,
depreciation, recruiting , facilities and cloud services data center costs .
Software support and service
Our software support and services cost of revenue primarily consists of costs associated with our global Customer
Success organization, including our customer support, professional services, customer advocacy and training teams. These costs
consist of salaries, benefits, bonuses, stock-based compensation, depreciation, recruiting, facilities and information technology
costs.
Gross
Margin
Gross margin, or gross profit as a percentage of total revenue, has been and will continue to be affected by various
factors, including mix between large and small customers, mix of products sold, mix between perpetual and subscription licenses,
timing of revenue recognition and the extent to which we expand our global Customer Success organization and data center
operations, including costs associated with third-party hosting facilities , and stock-based compensation expense associated with
grants of equity awards . We expect our gross margins to fluctuate over time depending on the factors described above.
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Table of Contents
Operating
Expenses
Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses,
stock-based compensation and with regard to sales and marketing expense, sales commissions. We expect operating expenses to
increase in absolute dollars, as we continue to invest to grow our business. While operating expenses, exclusive of stock-based
compensation expense, may fluctuate as a percentage of total revenue from period to period, we expect them to decrease over the
long term as a percentage of total revenue. Stock-based compensation expense may fluctuate depending on the size and timing of
restricted stock unit grants and, stock-settled bonus plans, if any.
Research
and
Development
Expenses
Research and development costs are expensed as incurred. Research and development expense consists primarily of
personnel costs. Research and development expense also includes costs associated with contractors and consultants, equipment
and software to support our development and quality assurance team s, facilities and information technology. We expect research
and development expense to increase in absolute dollars as we continue to invest in our future products and services. While our
research and development expense, exclusive of stock-based compensation expense, as a percentage of total revenue may
fluctuate, we expect it to decrease over the long term as a percentage of total revenue.
Sales
and
Marketing
Expenses
Sales and marketing expense consists primarily of personnel costs, including sales commissions. We expense
commissions up-front at the time of the sale. Sales and marketing expense also includes third-party events, lead generation
campaigns, promotional and other marketing activities, as well as travel, equipment and software depreciation, consulting,
information technology and facilities. While our sales and marketing expense, exclusive of stock-based compensation expense, as
a percentage of total revenue may fluctuate, we expect it to decrease over the long term as a percentage of total revenue.
General
and
Administrative
Expenses
General and administrative expense consists of personnel costs, travel, information technology, facilities and
professional services fees. General and administrative personnel include our executive, finance, human resources and legal
organizations. Professional services fees consist primarily of litigation, other legal, accounting and consulting costs. While our
general and administrative expense , exclusive of stock-based compensation expense, as a percentage of total revenue may
fluctuate, we expect it to decrease over the long term as a percentage of total revenue.
Restructuring
Charges
The restructuring charge consisted of the costs related to our restructuring plan to reduce our cost structure through a
workforce reduction.
Amortization
of
Intangible
Assets
Our amortization of intangible assets consists of amortization of noncompete covenants.
Other
Expense
— Net
Other expense, net consists primarily of the effect of exchange rates on our foreign currency-denominated asset and
liability balances and interest income earned on our cash and cash equivalents and fixed income securities . All translation
adjustments are recorded as foreign currency gains (losses) in the consolidated statements of operations. Interest income was
insignificant for all periods presented.
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Table of Contents
Income
Tax
Expense
Income tax expense consists primarily of income taxes in foreign jurisdictions in which we conduct business. Due to our
history of losses, we maintain a full valuation allowance for deferred tax assets including net operating loss carry-forwards,
research and development tax credits , capitalized research and development and other book versus tax differences .
Consolidated
of
Results
of
Operations
The following tables summarize our results of operations for the periods presented and as a percentage of our total
revenue for those periods. The period-to-period comparison of results is not necessarily indicative of results for future periods.
(in thousands, except share and per share data)
Revenue
Perpetual license
Subscription
Software support and services
Total revenue(1)
Cost of revenue
Perpetual license
Subscription
Software support and services
Total cost of revenue(1)
Gross profit
Operating expenses:
Research and development(1)
Sales and marketing (1)
General and administrative(1)
Restructuring charge
Amortization of intangible assets
Impairment of in-process research and development
Total operating expenses
Operating loss
Other expense - net
Loss before income taxes
Income tax expense
Net loss
Net loss per share, basic and diluted
Weighted-average shares used to compute net loss per share, basic and diluted
(1) Includes Stock-based compensation as follows:
54
Year
ended
December
31,
2014
2013
2015
$
53,512 $
48,080
47,706
149,298
66,816 $
30,227
35,252
132,295
69,810
15,085
20,679
105,574
2,881
7,181
18,115
28,177
121,121
4,448
5,719
13,868
24,035
108,260
61,871
105,520
36,037
1,049
—
—
204,477
(83,356)
274
(83,630)
852
(84,482) $
(1.07) $
$
$
46,278
99,870
22,400
—
782
—
169,330
(61,070)
302
(61,372)
517
(61,889) $
(1.30) $
78,755
47,517
3,327
3,684
9,489
16,500
89,074
36,400
68,309
12,081
—
208
3,925
120,923
(31,849)
396
(32,245)
252
(32,497)
(3.27)
9,953
Table of Contents
(In thousands)
Contra-revenue
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total
(As a percentage of total revenue)
Revenue
Perpetual license
Subscription
Software support and services
Total revenue
Cost of revenue
Perpetual license
Subscription
Software support and services
Total cost of revenue
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Restructuring charge
Amortization of intangible assets
Impairment of in-process research and development
Total operating expenses
Operating loss
Other expense - net
Loss before income taxes
Income tax expense
Net loss
Years
Ended
December
31,
201
5
,
201
4
and
201
3
Year
ended
December
31,
2014
2015
2013
$
— $
123 $
2,774
10,607
9,508
5,902
1,353
5,980
5,930
3,363
$ 28,791 $ 16,749 $
78
327
5,238
1,893
931
8,467
Year
ended
December
31,
2014
2015
2013
36 %
32
32
100
50 %
23
27
100
66 %
14
20
100
2
5
12
19
81
3
4
11
18
82
3
4
9
16
84
41
71
24
1
—
—
137
(56)
—
(56)
1
35
35
65
75
11
17
—
—
—
1
4
—
115
128
(31)
(46)
—
—
(31)
(46)
—
—
(57) % (46) % (31) %
Revenue
(in thousands,
except percentages)
Perpetual
Subscription
Software support and services
Total revenue
Percentage of total revenue
Perpetual
Subscription
Software support and services
Change
Year
Ended
December
31,
2015
vs
2014
2014
vs
2013
$
2015
53,512
48,080
47,706
$
2014
66,816
30,227
35,252
$
2013
69,810
15,085
20,679
Amount
$
(13,304)
17,853
12,454
$
149,298
$
132,295
$
105,574
$
17,003
%
Amount
%
(20)% $
(2,994)
59 %
15,142
35 %
14,573
13 % $ 26,721
(4)%
100 %
70 %
25 %
36 %
32
32
100 %
66 %
14
20
100 %
50 %
23
27
100 %
55
Table of Contents
For
the
year
ended
December
31,
Change
2015
2014
2013
2015
vs
2014
2014
vs
2013
(in thousands,
except percentages)
Revenue
United States
International
Total revenue
Amount
$ 74,235
75,063
$ 149,298
%
of
Total
Revenue Amount
%
of
Total
Revenue Amount
%
of
Total
Revenue Amount % Amount %
50 % $ 72,124
50 %
60,171
100 % $ 132,295
55 % $ 58,656
46,918
45 %
100 % $ 105,574
56 % $ 2,111
44 % 14,892
100 % $ 17,003
3 % $ 13,468
25 % 13,253
13 % $ 26,721
23 %
28 %
25 %
Comparison of 201 5 and 201 4
Perpetual license revenue decreased $13.3 million in 2015 compared to 2014, primarily due to a shift in favor of
software licenses priced as subscriptions, including MRC, a slowdown in perpetual license orders and a $ 3.4 million decrease
in revenue recognized from licenses that were delivered prior to 2013, but for which the revenue is being recognized ratably over
the contractual terms of the related software support agreements due to lack of VSOE for software support and services prior to
January 1, 2013.
Subscription revenue increased $17.9 million, or 59%, in 2015 compared to 2014, due to increased sales of solutions
sold under either a cloud-based delivery model or a subscription term license for our on premise software products. The increase
in subscription revenue also included an increase in MRC revenue from $12.6 million in 2014 to $21.1 million in 2015.
Software support and services revenue increased $12.5 million, or 35%, in 2015 compared to 2014, primarily as a result
of an increased installed base of customers that pay recurring software support.
Revenue from international sales increased 25% in 2015 compared to 2014 due to an increase in the adoption of our
products and an increased cumulative installed base of customers partially offset by a decrease in revenue recognized from
perpetual licenses delivered prior to 2013, as noted above.
Revenue from U.S. sales increased 3% in 2015 compared to 2014 due to an increase in the adoption of our products and
an increased cumulative installed base of customers, partially offset by the shift in the mix from perpetual to subscription,
including MRC, a slowdown in perpetual license orders, and less revenue being recognized from licenses delivered prior to 2013.
Revenue from AT&T, as a reseller, was 16% of total revenue in 2015 compared with 20% in 2014. No other customer
accounted for 5% or more of total revenue in 2015 and 2014.
Comparison of 2014 and 2013
Perpetual license revenu e decreased $3.0 million in 2014 compared to 2013 , due to a $12.8 million increase associated
with adoption of our solutions by both new and existing customers, offset by a $15.8 million decrease in revenue recognized from
licenses that were delivered prior to 2013, but for which the revenue is being recognized ratably over the contractual terms of the
related software support agreements due to lack of VSOE for software support and services prior to January 1, 2013.
Subscription revenue increase d $15.1million, or 100%, in 2014 compared to 2013 , primarily due to increased sales of
solutions sold under either a cloud-based delivery model or a subscription term license for our on premise software products. The
increase in subscription revenue also included an increase in MRC r evenue from $6.0 million in 2013 to $12.6 million in 2014 .
Software support and services revenue increase d $14.6 million, or 70%, in 2014 compared to 2013 , primarily as a result
of an increased installed base of customers that pay recurring software support and additional users and devices within preexisting
customers.
56
Table of Contents
Revenue from internati onal sales increased 28% in 2014 compared to 2013 due to an increase in the adoption of our
products and an increased cumulative installed base of customers partially offset by a decrease in revenue recognized from
perpetual licenses delivered prior to 2013, as noted above.
Revenue from AT&T, as a reseller, was 2 0% of total revenue in both 2014 and 2013 . No other customer accounted for
5% or more of total revenue in 2014 and 2013 .
Cost
of
Revenue
and
Gross
Margin
For
the
year
ended
December
31,
Change
2015
%
of
Total
2014
%
of
Total
2013
2015
vs
2014
2014
vs
2013
%
of
Total
Amount
Revenue
Amount
Revenue
Amount
Revenue
Amount
%
Amount
%
$
2,881
7,181
18,115
$ 28,177
$ 121,121
2 % $
5 %
4,448
5,719
3 % $ 3,327
3,684
4 %
3 % $ (1,567)
1,462
4 %
(35)% $ 1,121
2,035
26 %
12 %
13,868
19 % $ 24,035
$ 108,260
81 %
11 %
9,489
18 % $ 16,500
$ 89,074
82 %
9 %
16 % $
4,247
4,142
$ 12,861
31 %
4,379
17 % $ 7,535
12 % $ 19,186
84 %
34 %
55 %
46 %
46 %
22 %
(in thousands,
except percentages)
Cost of revenue:
Perpetual license
Subscription
Software support and
services
Total cost of revenue
Gross profit
Gross margin
Comparison of 201 5 and 201 4
Total cost of revenue increased $4.1 million, or 17%, in 2015 compared to 2014. Perpetual license cost of revenue
decreased $1.6 million, or 35%, primarily due to a decrease in sales of our hardware appliance s and a decrease in royalties.
Subscription cost of revenue increased $1.5 million, or 26%, due to an increase in Global Customer Success organization expense
and other third-party costs. Software support and services cost of revenue increased $4.2 million, or 31%, due to an increase in
our g lobal Customer Success organ ization expense, which included $3.7 million of increases in salaries, associated payroll taxes,
an d fringe benefit costs as well as an approximately $1.4 million increase in stock-based compens ation expense. The decrease in
gross margin in 2015 compared to 2014 was primarily due to the unfavorable impact of the decrease in revenue that was
recognized from perpetual licenses that were delivered prior to 2013 and due to increase in stock-based compensation by $1.3
milli on. Excluding the impact of the reduction in VSOE-related reven ue, gross margin was 81% in 2015 and 2014 .
Comparison of 2014 and 2013
Total cost of revenue increased $7.5 million, or 46%, in 2014 compared to 2013. Perpetual license cost of revenue
increased $1.1 million, or 34%, primarily due to an increase in hardware appliance and other inventory-related costs, royalty costs
associated with increased perpetual license sales and amortization of intangibles assets. Subscription cost of revenue increased
$2.0 million, or 55%, due to an increase in data center operations expense, global Customer Success organization expense and
other third-party costs. Software support and services cost of revenue increased $4.4 million, or 46%, due to an increase in our
global Customer Success organization expense, which included $2.3 million of increases in salaries, associated payroll taxes, and
higher fringe benefit costs as well as an approximately $1.0 million increase in stock-based compensation expense. The decrease
in gross margin in 2014 compared to 2013 was primarily due to the unfavorable impact of the decrease in revenue that was
recognized from perpetual licenses that were delivered prior to 2013. Excluding the impact of this reduction in VSOE-related
revenue, gross margin was 81% in 2014 and 2013.
Operating
Expenses
57
Table of Contents
(in thousands,
except percentages)
Operating expenses:
Research and
development
Sales and marketing
General and
administrative
Restructuring charge
Amortization of
intangible assets
Impairment of in-
process research and
development
Total operating
expenses
For
the
year
ended
December
31,
Change
2015
2014
2013
2015
vs
2014
2014
vs
2013
%
of
Total
Revenue
Amount
Revenue
Amount
Revenue
Amount
%
Amount
%
%
of
Total
%
of
Total
Amount
$
61,871
105,520
36,037
1,049
41 % $ 46,278
99,870
71 %
35 % $ 36,400
68,309
75 %
35 % $ 15,593
5,650
65 %
34 % $
6 %
9,878
31,561
24 %
1 %
22,400
—
17 %
— %
12,081
—
11 % 13,637
— %
61 %
1,049 NM %
10,319
—
27 %
46 %
85 %
85 %
—
— %
782
1 %
208
— %
(782)
(100)%
574
276 %
—
— %
—
— %
3,925
4
— NM %
(3,925)
(100)%
$
204,477
137 % $ 169,330
115 % $ 120,923
115 % $ 35,147
21 % $ 48,407
40 %
Comparison
of
2015
and
2014
Research and development expense increased $15.6 million, or 34%, in 2015 compared to 2014, primarily due to an
increase in personnel costs of $10.7 million as we increased our development headcount to support continued investment in our
product and service offerings. This expense also includes an increase in stock-based compensation expense of $4.6 million. The
stock-based compensation expense increase was driven primarily by stock-settled bonus expense, associated with a new bonus
program in 2015, restricted stock unit grants and our ESPP, which was introduced in mid-2014 after our IPO, but was partially
offset by a reduction in expense associated with restricted stock held by employees who terminated in 2014. Facilities and other
infrastructure expenses increased by $3.4 million to support the increased headcount in research and development. Support of
headcount growth was also the primary reason for increases in facilities and infrastructure expenses in the other functional areas.
In order to accommodate headcount growth we entered into several new office leases in 2015. Professional fees increased by $1.2
million, as we supplemented our development resources.
Sales and marketing expense increased $5.7 million, or 6%, in 2015 compared to 2014, primarily due to an increase in
personnel costs of $3.6 million. While average sales and marketing headcount was higher in 2015 than 2014, we reduced our sales
and marketing personnel in the second half of 2015 to better align our cost structure with our slower billings growth. Personnel
costs include an increase of $4.0 million in salaries and an increase of $3.6 million for stock-based compensation expense, offset
by a $4 million decrease in commissions and other payroll-related expenses. The stock-based compensation expense increase was
driven primarily by restricted stock unit grants and the ESPP. Professional fees increased by $895,000 due to recruiting fees and
contractors supporting our sales team in non-U.S. locations. Travel-related expense increased $494,000 as a result of increased
travel requirements of our larger sales team. Our third-party marketing-related expense increased $451,000 as we invested in
events, demand generation, public relations, marketing infrastructure, and various other programs to expand our customer base
and maintain and grow relationships with our existing customers.
General and administrative expense increased $13.6 million, or 61%, in 2015 compared to 2014, primarily due to
increases in personnel costs of $5.2 million and litigation and other professional fees expense of $7.7 million . Personnel costs
include an increase in stock-based compensation expense of $2.5 million. The stock-based compensation expense increase was
driven primarily by stock-settled bonus expense , restricted stock unit grants and the ESPP. Litigation and other professional fees
increased $7.7 million primarily as a result of our patent litigation trial in California in July 2015 and extensive pre-trial work in
other jurisdictions. We settled the global patent litigation with Good Technology in November 2015. The settlement included a
mutual dismissal of all claims and an immaterial license agreement. Facilities and infrastructure expense for our general and
administrative personnel increased by $681,000 .
We recorded a $1.0 million restructuring charge in 2015 as part of a workforce reduction. The workforce reduction was
designed to reduce our cost structure and align our spending with our billings growth rate.
58
Table of Contents
We recorded no am ortization of intangible assets in operating expenses in 2015 compared to $782,000 in 2014 as our
noncompete covenants intangible asset became fully amortized in 2014.
In 2013, we abandoned a n in-process research and development, or IPR&D , project and recorded a $3.9 million
impairment loss . We had no similar charges in 2015.
Comparison
of
2014
and
2013
Research and development expense increased $9.9 million, or 27%, in 2014 compared to 2013, primarily due to an
increase in personnel costs of $7.4 million as we increased our development headcount to support continued investment in our
product and service offer ings. This expense also included an increase in stock-based compensation expense of $742,000. The
stock-based compensation expense increase was driven primarily by stock option grants, some of which are expensed under the
graded vesting method, and the introduction of the Company’s 2014 Employee Stock Purchase Plan, or ESPP, but partially offset
by a reduction in expense associated with restricted stock held by employees who terminated during the year. Facilities and other
office expenses increased by $1.9 million to support the increased headcount in research and development and the build-out of the
additional development and testing infrastructure. Support of headcount growth was also the primary reason for increases in
facilities and infrastructure expenses in the other functional areas.
Sales and marketing expense increased $31.6 million, or 46%, in 2014 compared to 2013, primarily due to an increase in
personnel costs of $23.7 million related to increased sales headcount to drive growth. This expen se also included $5.5 million
and $4.0 million of increased commission expense and stock-based compensation expense, respectively. The stock-based
compensation expense increase was driven primarily by stock option grants, some of which are expensed under the graded vesting
method, and the introduction of the ESPP. Travel and conference expense increased $3.8 million as a result of increased travel
requirements of our larger sales team and our expansion into foreign markets. Our third-party marketing-related expense
increased $1.8 million as we invested in events, demand generation, public relations, marketing infrastructure, and various other
programs to expand our customer base and maintain and grow relationships with our existing customers. Our facilities and
infrastructure expense for our sales and marketing personnel increased by $1.5 million.
General and administrative expense increased $10.3 million, or 85%, in 2014 compared to 2013, primarily due to
increases in personnel costs of $6.2 million. This e xpense also included an increase in stock-based compensation expense of $2.4
million. We increased general and administrative headcount in 2014 to support business growth and the requirements of being a
publicly traded company. The stock-based compensation expense increase was driven primarily by stock option grants, some of
which are expensed under the graded vesting method, and the introduction of the ESPP. Professional services costs, including
legal fees, accounting, consulting and insurance, increased $2.7 million, primarily due to expenses associated with being a
publicly traded company. Facilities and infrastructure expense for our general and administrative personnel increased by $1.5
million.
Amortization of intangible assets recorded in operating expense was $782,000 in 2014 and $208,000 in 2013. The
increase was due to the acceleration of amortization of the noncompete covenants intangible asset in conjunction with the
termination of employees subject to noncompete agreements.
In 2013, we abandoned a n IPR&D project and recorded a $3.9 million impairment loss.
Other
Expense—Net
(in thousands,
except percentages)
Other expense—net
For
the
year
ended
December
31,
Change
2015
2014
2013
Amount % Amount %
2015
vs
2014
2014
vs
2013
$
274 $
302 $
396 $
(28)
(9) % $
(94)
(24) %
Other expense—net was primarily comprised of foreign currency transaction losses and losses from the translation of
foreign-denominated balances to the U.S. dollar.
59
Table of Contents
Income
Tax
Expense
(in thousands,
except percentages)
Income tax expense
For
the
year
ended
December
31,
Change
2015
vs
2014
2014
vs
2013
2015
2014
2013
Amount
%
Amount
%
$
852
$
517
$
252
$
335
65 % $
265
105 %
Income tax expense was $852,000, $517,000 and $252,000 during 2015, 2014 and 2013, respective ly. The increase in
income tax expense from 2014 to 2015 was primarily due to an increase in foreign income taxes on profits realized by our foreign
branches and subsidiaries as we expanded internationally and, to a lesser extent, to withholding taxes on sales in certain
jurisdictions .
Quarterly
Results
of
Operations
The following table sets forth our unaudited quarterly statements of operations data for the last eight fiscal quarters. The
information for each of these quarters has been prepared on the same basis as the audited annual financial statements included
elsewhere in this annual report and, in the opinion of management, includes all adjustments, which includes only normal recurring
adjustments, necessary for the fair statement of the results of operations for these periods. This data should be read in conjunction
with our audited consolidated financial statements and related notes included elsewhere in this annual report. These quarterly
operating results are not necessarily indicative of our operating results for any future period.
60
Table of Contents
We do not believe that inflation had a material effect on our business, financial condition or results of operations in the
last three fiscal years. 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.
(in thousands, except share and per share data)
December
September
31,
2015
30,
2015
June
30,
2015
March
31,
2015
December
31,
2014
September
30,
2014
June
30,
2014
March
31,
2014
Three
Months
Ended
Revenue
Perpetual license
Subscription
Software support and services
Total revenue
(1)
Cost of revenue
Perpetual license
Subscription
Software support and services
Total cost of revenue
(1)
Gross profit
Operating expenses
Research and development
(1)
Sales and marketing
(1)
General and administrative
(1)
Restructuring charges
Amortization of intangible assets
Impairment of in-process research and
development
Total operating expenses
Operating loss
Other (income) expense - net
Loss before income taxes
Income tax expense
Net loss
Net loss per share, basic and diluted
Weighted-average shares used to compute net
loss per share, basic and diluted
$ 15,462 $ 13,644 $ 12,347 $ 12,059 $
14,413
13,171
43,046 38,001 34,757 33,494
10,197
11,238
11,217
11,193
12,253
12,104
910
1,815
4,815
7,540
599
1,739
4,157
6,495
35,506 30,428 28,188 26,999
627
1,688
4,254
6,569
745
1,939
4,889
7,573
16,503 16,968 14,899 13,501
24,822 25,856 29,037 25,805
8,398
—
—
8,065 10,469
1,049
—
9,105
—
—
—
—
—
—
—
138
—
49,390 54,342 53,041 47,704
(13,884) (23,914) (24,853) (20,705)
122
(14,022) (23,912) (24,869) (20,827)
133
$ (14,414) $ (24,095) $ (25,013) $ (20,960) $
(0.27) $
$
(0.32)
(0.30)
(0.18)
183
144
392
16
(2)
18,658 $ 17,550 $ 15,933 $ 14,675
9,126
5,966
9,914
7,572
37,698 34,917 31,467 28,213
8,031
9,336
7,104
8,430
1,111
1,056
1,574
3,811
6,441
5,237
31,257 28,468 25,559 22,976
1,268
1,439
3,742
6,449
1,013
1,466
3,429
5,908
2,886
1,240
12,495 11,565 11,919 10,299
27,425 25,618 25,063 21,764
6,443
4,608
—
—
6,232
—
365
5,117
—
365
—
52
—
—
—
—
46,363 43,780 42,464 36,723
(15,106) (15,312) (16,905) (13,747)
97
(15,150) (15,378) (17,000) (13,844)
118
(15,303) $ (15,513) $ (17,111) $ (13,962)
153
111
135
66
44
95
(0.20) $
(0.20) $
(0.66) $
(1.23)
80,748 79,373 78,198 76,990
76,034 75,871 26,028 11,335
(1) Amounts include stock-based compensation as follows:
(in thousands)
Stock-Based
Compensation
Expense:
$
Contra-revenue
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total stock-based
compensation
expense
$
December
31,
2015
September
30,
2015
June
30,
2015
Three
Months
Ended
December
31,
2014
March
31,
2015
September
30,
2014
June
30,
2014
March
31,
2014
—
846
2,898
2,894
1,780
—
1,055
3,832
2,586
1,812
—
443
2,149
2,193
1,167
— $
430
1,728
1,835
1,143
— $
456
1,606
1,859
1,017
$
-
468
1,439
1,957
1,015
98 $
328
1,687
1,498
895
25
101
1,248
616
436
8,418
9,285
5,952
5,136 $
4,938
$
4,879
$
4,506
$
2,426
61
Table of Contents
Seasonality
T here are seasonal factors that may cause us to record higher revenue in some quarters compared to others. We believe
this variability is largely due to our customers’ budgetary and spending patterns, as many customers spend the unused portions of
their discretionary budgets prior to the end of their fiscal years. For example, we have historically recorded our highest level of
revenue in our fourth quarter, which we believe corresponds to the fourth quarter of a majority of our customers.
Liquidity
and
Capital
Resources
(In thousands)
Cash and cash equivalents
Short-term investments
Long-term investments
As
of
December
31,
2015
2014
2013
$ 47,234 $ 104,287 $ 73,573
49,576
2,094
13,869
22,220
—
—
(in thousands)
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
$
$
$
For
the
year
ended
December
31,
2014
(36,569)
(39,873)
107,156
2015
(48,535)
(19,679)
11,161
$
$
$
$
$
$
2013
(25,550)
(2,607)
63,038
At December 31, 2015, we had cash and cash equivalents of $47.2 million. Substantially all of our cash and cash
equivalents are held in the United States. At December 31, 2015, we had short-term investments of $49.6 million and long-term
investments of $2.1 million. In the twelve months ended Dec ember 31, 2015, we purchased $6 0.9 million of investment
securities and received $45 .0 million from maturities of investment securities.
In the fourth quarter of 2014, we began to invest a portion of our IPO proceeds from cash and cash equivalents into fixed
income securities, including commercial paper, corporate debt securities and obligations of U.S. government agencies. At
December 31, 2014 we had short-term investments of $13.9 million and long-term investments of $22.2 million.
In addition, we have a revolving line of credit with a financial institution with potential borrowing capacity to $18.5
million that expires in August 2017. We are required to maintain an adjusted quick ratio (defined as the ratio of current assets to
current liabilities minus deferred revenue) of at least 1.25. As of December 31, 2015, we had no borrowings outstanding under
this revolving loan facility and we were in compliance with our loan covenants.
Prior to our IPO, we financed our operations primarily through private sales of equity securities. In June 2014, we
raised, net of offering costs, $102.9 million in our initial public offering. We believe that our existing cash and cash equivalents
will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our future capital requirements will depend
on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of
sales and marketing activities, the introduction of new and enhanced products and services offerings, the continuing market
acceptance of our products, any future acquisition and similar transactions and the proportion of our perpetual versus subscription
sales. In the event that 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.
Cash Used in 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 increases in sales and timing of collections. Our primary use of cash from
operating activities has been for personnel costs. We expect cash outflows from operating activities to be affected by increases in
personnel costs as we grow our business. Cash used in operating activities was $48.5 million, $36.6 million and $25.6 million in
2015, 2014 and 2013, respectively.
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In 2015, we used $48.5 million of cash in operating activities primarily as a result of addition of headcount in research
and development, customer success, data center operations , investment in marketing programs, increase of our general and
administrative headcount and litigation legal expense . We incurred a net loss of $84.5 million in 2015 as we inc reased our
operating expenses 21 % to $204.5 million and increased our cost of revenue 1 7 % to $28.2 million. The net loss included non-
cash charges of $32.9 million, primarily due to stock-based compensation, depreciation and intangible asset amortization expense.
Changes in operating assets and liabilities, net of acquisitions, as sources of cash, consisted of a $15.7 million favorable increa se
in deferred revenue that was partially offset by an increase in accounts receivable of $8.1 million, a $5 .0 million unfavorable
change in accounts payable, accrued expenses and other long-term liabilities and an increase in other current and noncurrent
assets of $932,000.
In 2014, we used $36.6 million of cash in operating activities primarily as a result of our expansion of our sales
organization, investment in marketing programs, and the addition of headcount in research and development, customer success,
data center operations and our general and administrative teams. We incurred a net loss of $61.9 million in 2015 as we increased
our operating expenses 40% to $169.3 million and increased our cost of revenue 46% to $24.0 million. The net loss included non-
cash charges of $20.5 million, primarily due to stock-based compensation, depreciation and intangible asset amortization expense.
Changes in operating assets and liabilities, net of acquisitions, as sources of cash, consisted of a $13.4 million favorable increase
in deferred revenue and a $2.9 million favorable change in accounts payable, accrued expenses and other long-term liabilities that
were partially offset by increases in accounts receivable of $10.6 million and other current and noncurrent assets of $835,000.
In 2013, we used $25.6 million of cash for operating activities primarily as a result of the expansion of our sales
organization and investment in marketing programs, and the addition of headcount in research and development, customer
success and data center operations, partially offset by cash received from customers. We incurred a net loss of $32.5 million in
2013 as we increased our operating expenses 57% to $120.9 million and increased cost of revenue 41% to $16.5 million. The net
loss included non-cash charges of $14.4 million, primarily due to stock-based compensation, depreciation expense and
impairment of IPR&D. Unfavorable changes in operating assets and liabilities, net of acquisitions, of $7.4 million increased our
use of cash from operations, as growth in accounts receivable and decreases in deferred revenue was only partially offset by
increases in accrued liabilities, especially payroll-related accrued expense.
Cash Used in Investing Activities
Our investing activities have consisted of purchases of property and equipment, a business and technology and other
assets. We expect to continue to make such purchases to support the growth of our business.
Cash used in investing activities was $19.7 million in 2015 which consisted mostly of our purchase of $60.9 million of
short and long-term investments partially offset by $45 .0 million received from maturities of investment securities. In addition,
we purchased $3.7 million of property and equipment. We purchased equipment to expand our data centers and infrastructure to
support growth and to fit-out new office facilities.
Cash used in investing activities was $39.9 million and $2.6 million, in 2014 and 2013, respectively. In 2014, we
purchased $36.1 million of short and long-term investments. In addition, we purchased $3.1 million of equipment and software
and paid $650,000 to purchase intellectual property. In 2013, $2.2 million of the cash used in investing activities was attributable
to the purchase of equipment for the expansion of our data centers and increase in infrastructure to support our increasing
headcount. Property and equipment purchases were primarily to support our employee growth and expand our data centers.
Cash Provided by Financing Activities
Our financing activities have consisted of proceeds from the initial public offering, the issuance of convertible preferred
stock, the exercise of stock options, and borrowings and repayments under our revolving line of credit.
In 2015, our financing activities provided $11.2 million of cash. We received $5.4 million from employees who
participated in our ESPP and $5.8 million from the exercise of stock options.
In 2014, our financing activities provided $107.2 million of cash. Cash from financing activities in 2014 included
proceeds from our IPO of $107.0 million, net of underwriting discounts and commissions, $2.0 million of
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proceeds from the issuance of convertible preferred stock, $2.3 million from the exercise of stock options as well as $4.3 million
of cash received from employees related to our ESPP, partially offset by a net $4.3 million repayment of borrowings from our
revolving line of credit and $4.1 million in payments of IPO offering costs.
In 2013, our financing activities provided $63.0 million, which included $57.7 million of net proceeds from the issuance
of convertible preferred stock, $4.3 million from borrowings under our revolving line of credit and $1.0 million from the exercise
of stock options.
Contractual
Obligations
and
Commitments
The following table summarizes our contractual commitments and obligations as of December 31, 201 5 :
(In thousands)
Operating lease obligations
Purchase obligations
Total
Less
Than
1
year
1-3
years 3-5
years
Total
$ 29,829 $ 6,172 $ 9,651 $ 7,403 $
—
$ 35,263 $ 11,381 $ 9,876 $ 7,403 $
5,209
5,434
225
More
Than
5
years
6,603
—
6,603
We lease our office facilities under noncancelable operating lease agreements expiring between 2016 and 2023 .
As of December 31, 2015, our net unrecognized tax benefits including interest and penalties were $4. 1 million, $3.9
million of which are netted against deferred tax assets. At this time, we are unable to make a reasonably reliable estimate of the
timing of payments in individual years in connection with these tax liabilities; therefore, such amounts are not included in the
above contractual obligation table.
Off-Balance-Sheet
Arrangements
Through December 31, 2015 , 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 or other contractually narrow or limited purposes.
Segment
Information
We have one primary business activity and operate in one reportable segment.
Concentration
AT&T accounted for approximately 17% of our revenue (including 1% as an end customer) in 2015. In 2014, AT&T
accounted for approximately 22% of our revenue (including 2% as an end customer). Our agreements with this reseller were
made in the ordinary course of our business and may be terminated with or without cause by either party with advance notice.
Although we believe we would experience some short term disruption in the distribution of our products, subscriptions and
services if these agreements were terminated, we believe such termination would not have a material adverse effect on our
financial results and alternative resellers and other channel partners exist to deliver our products to our end customers.
Critical
Accounting
Policies
and
Estimates
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical
experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates
and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material
differences between these estimates and our actual results, our future financial statements will be affected.
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The critical accounting policies requiring estimates, assumption and judgments that we believe have the most significant
impact on our consolidated financial statements as described below. For further information on all of our significant accounting
policies, see Note 1 entitled “Description of Business and Significant Accounting Policies” in Part II, Item 8 “Financial
Statements and Supplementary Data” of this Annual Report on Form 10-K.
Revenue Recognition
We derive revenue principally from software-related arrangements consisting of perpetual software licenses, post-contract
customer support for such licenses, or PCS or software support, including when and if available updates, and professional
services such as consulting and training services. We also offer our software as term-based licenses and cloud-based
arrangements. In addition, we install our software on servers that we ship to customers.
We consider following to be key accounting policy elections and estimates in our revenue recognition:
(i)
(ii)
(iii)
(iv)
(v)
Determining VSOE of fair value and best estimate of selling price, or BESP, of fair value used to allocate revenue
between the elements of multiple elements arrangements requires significant judgment . As of January 1, 2013,
we determined that we had sufficient history to establish VSOE of fair value for PCS and professional services.
Prior to January 1, 2013, we did not have VSOE of fair value for our software-related undelivered elements due to
a limited history of stand-alone sales transactions and inconsistency in pricing. We established VSOE of fair
value when we had a substantial majority of stand-alone sales transactions of software support and services
pricing within a narrow pricing band. In our VSOE analysis, we generally include stand-alone sales transactions
completed during a rolling 12 month period unless a shorter period is appropriate due to c hanges in our pricing
structure. Because we did not achieve pricing consistency for our products, including product subscription and
cloud-based services, we use the residual method to allocate revenue in multiple element arrangement within
scope of ASC 985 -605 Software Revenue Recognition and BESP to allocate the revenue in multiple element
arrangement within scope of ASC 605 Revenue recognition ;
Determining whether collection of customer receivables is probable may require significant judgment. We assess
collection on customer-by-customer and deal-by-deal basis and assess such factors as history of payments,
financial condition, and payment terms;
Generally, sales made through resellers are fulfilled to the end customer and processed in the same period.
Inventory of the licenses held by the resellers was immaterial for all periods presented;
We consider our resellers our customers and recognize revenue based on the price charged to resellers; and
Sales commissions and other incremental costs to acquire contracts are expensed as incurred and are recorded in
sales and marketing expense.
Goodwill and Intangible Assets with Indefinite Lives
We record the excess of the acquisition purchase price over the fair value of the tangible and identifiable intangible
assets acquired as goodwill. We perform an impairment test of our goodwill in the third quarter of our fiscal year, or more
frequently if indicators of potential impairment arise. We have a single reporting unit and consequently evaluate goodwill for
impairment based on an evaluation of the fair value of the Company as a whole. We record purchased intangible assets at their
respective estimated fair values at the date of acquisition. Purchased intangible assets are being amortized using the straight-line
method over their remaining estimated useful lives, which range from three to five years. We evaluate the remaining useful lives
of intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining
estimated amortization period. We evaluated our goodwill for impairment in 201 5 and 201 4 and observed no impairment
indicators.
We also review our indefinite lived intangible assets for impairment. We have determined that our intangible assets have
not been impaired in 201 5 .
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Stock-Based Compensation
Stock-based compensation costs related to restricted stock and stock options granted to employees are measured at the date
of grant based on the estimated fair value of the award, net of estimated forfeitures. We estimate the grant date fair value, and the
resulting stock-based compensation expense, using the Black-Scholes option-pricing model. We recognize compensation costs for
awards with service and performance vesting conditions on an accelerated method under the graded vesting method over the
requisite service period of the award. For stock awards with no performance condition, we recognize compensation costs on a
straight-line basis over the requisite service period of the award, which is generally the vesting term of four years.
Key assumptions used in determining the fair value of our stock option grants are estimated as follows:
·
·
·
·
·
Risk-Free
Interest
Rate.
We base the risk-free interest rate used in the Black-Scholes valuation model on the implied
yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term of the options for each option
group.
Expected
Term
. The expected term represents the period that our stock-based awards are expected to be outstanding.
We have opted to use the simplified method for estimating the expected term, which calculates the expected term as
the average time-to-vesting and the contractual life of the options.
Volatility
. We determine the price volatility factor based on the historical volatilities of our peer group as we did not
have sufficient trading history for our common stock.
Dividend
Yield
. The expected dividend assumption is based on our current expectations about our dividend policy.
We currently do not expect to issue any dividends.
Forfeiture
Rate
. The forfeiture rate is calculated on expected employee turnover. We have applied the same forfeiture
rate to our entire employee population.
The fair value of the employee stock options was estimated using the following assumptions for the periods presented:
Expected dividend yield
Risk-free interest rate
Expected volatility
Expected life (in years)
Year
ended
December
31,
2014
—
2013
—
2015
—
1.6% -
1.8%
43% - 45%
5.5 - 6.1
1.7% - 2.1%
48% - 56%
5.6 - 6.5
1.1% - 1.9%
52% - 53%
5.9 - 6.3
The fair value of the rights to acquire stock under our ESPP was estimated using the following assumptions for the periods
presented:
Expected dividend yield
Risk-free interest rate
Expected volatility
Expected life (in years)
Year
ended
December
31,
2015
—
0.1% - 0.7%
34% - 35%
0.5 – 2.0
2014
—
0.1% - 0.5%
47% - 49%
0.7 - 2.2
We estimate the fair value of the rights to acquire stock under our ESPP using the Black-Scholes option pricing formula.
Our ESPP typically provides for consecutive 24 month offering periods, consisting of four tranches. We recognize compensation
expense on an accelerated-graded basis over the employee’s requisite service period. We account for the fair value of restricted
stock units, or RSUs, using the closing market price of our common stock on the date of grant. RSUs typically vest ratably on a
quarterly basis over one to four years.
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Table of Contents
Stock-based compensation expense associated with our stock-settled bonus program is recognized on a straight-line basis
over the required service period and the expense is evaluated each quarter based on our company’s performance relative to the
metrics that determine the bonus pool.
In 2015, 2014 and 2013, stock-based compensation expense was $28.8 million, $16.6 million and $8.4 million,
respectively. As of December 31, 2015, we had approximately $ 52.2 million of total unrecognized compensation expense, net of
related forfeiture estimates.
Income Taxes
We account for income taxes in accordance with ASC Topic 740, Income Taxes, under which deferred tax liabilities and
assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying
amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected to be realized.
We currently have a full valuation allowance against our U.S. net deferred tax assets of $96.0 million as of December 31,
201 5 . We continue to monitor the relative weight of positive and negative evidence of future profitability in relevant
jurisdictions. When evidence indicating that it becomes more likely than not that the tax asset may be utilized, the allowance will
be released.
Recent
Accounting
Pronouncements
For discussion on recent accounting pronouncements, see “ Summary of Significant Accounting Policies ” under Note 1 “
Description of Business and Significant Accounting Policies” included in Item 8, “ Financial Statements and Supplementary Data
” of Part II of this Annual Report on Form 10-K.
Item
7
A.
Quantitative
and
Qualitative
Disclosures
about
Market
Risk
Foreign
Currency
Exchange
Risk
Our sales contracts are currently primarily denominated in U.S. dollars. A portion of our operating expenses are incurred
outside the United States and are denominated in foreign currencies and are subject to fluctuations due to changes in foreign
currency exchange rates, particularly changes in the British Pound and Euro. In 2015, our operating expenses benefitted from the
increase in the value of the U.S. dollar versus the Euro and other foreign currencies. If, in 2015 or future years, the U.S. dollar
declines in value versus the Euro or other currencies, our operating expenses will increase. The effect of a hypothetical 10%
change in foreign currency exchange rates applicable to our business would not have a material impact on our consolidated
financial statements. To date, we have not engaged in any hedging strategies. As our international operations grow, we will
continue to reassess our approach to managing our risk related to fluctuations in currency rates.
Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in
our statement of operations. To date, foreign currency transaction gains and losses have not been material to our financial
statements.
Interest
Rate
Risk
We had cash, cash equivalents and fixed income investments of $ 98.9 million and $ 140.4 million as of December 31,
201 5 and 201 4 , respectively, consisting of bank deposits, money market funds, corporate debt securit ies, commercial paper and
securities and obligations of U.S. government agencies.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial
instruments to manage our interest rate risk exposure. By policy, we limit the amount of credit exposure to any one issuer and our
investments are held with capital preservation as the primary objective.
Our cash equivalents and investments are subject to market risk due to changes in interest rates.
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Table of Contents
Due to increases in interest rates, we may suffer losses in principal if we are forced to sell securities that decline in
market value due to changes in interest rates. However, because we classify our investments as “held-to-maturity”, no gains or
losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in value are
determined to be other-than-temporary. We believe that we do not have any material exposure to changes in the fair value of our
investment portfolio as a result of changes in interest rates. Declines in interest rates, however, will reduce future investment
income, if any. For instance the effect of a hypothetical 50 basis point increase or decrease in interest rates would result in a
change of approximately $250,000 to our annual interest income.
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Table of Contents
Item
8.
Financial
Statements
and
Supplementary
Data
The Selected Financial Data information contained in Item 6 of Part II hereof is hereby incorporated by reference into
this Item 8 of Part II of thi s Form 10-K.
MobileIron,
Inc.
Index
to
Consolidated
Financial
Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
No.
70
71
72
73
74
75
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Table of Contents
Report
of
Independent
Registered
Public
Accounting
Fir
m
Board of Directors and Stockholders of MobileIron, Inc.
Mountain View, California
We have audited the accompanying consolidated balance sheets of MobileIron, Inc. and subsidiaries (the “Company”) as of
December 31, 2015 and 2014, and the related consolidated statements of operations, convertible preferred stock and stockholders’
equity (deficit), and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of
MobileIron, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the
United States of America.
/s/ Deloitte & Touche LLP
San Jose, California
February 23 , 2016
70
Table of Contents
ASSETS
Current assets:
MOBILEIRON,
INC.
CONSOLIDATED
BALANCE
SHEETS
(In
thousands,
except
share
and
per
share
data)
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for doubtful accounts of $628 and $550 at December 31, 2015 and 2014,
respectively
Prepaid expenses and other current assets
Total current assets
Long-term investments
Property and equipment—net
Intangible assets—net
Goodwill
Other assets
TOTAL ASSETS
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue-current
TOTAL CURRENT LIABILITIES
Long-term liabilities:
Deferred revenue-noncurrent
Other long-term liabilities
TOTAL LIABILITIES
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock, $0.0001 par value, 300,000,000 shares authorized, 81,326,237 shares and 76,153,844 shares
issued and outstanding at December 31, 2015 and December 31, 2014, respectively
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
See accompanying notes to the consolidated financial statements
71
$
$
$
December
31,
2015
2014
47,234
49,576
42,674
4,809
144,293
2,094
6,572
1,261
5,475
1,419
161,114
2,551
19,196
55,978
77,725
13,897
1,353
92,975
$
$
$
104,287
13,869
34,676
4,018
156,850
22,220
3,978
2,132
5,475
1,187
191,842
1,137
21,169
44,096
66,402
10,078
268
76,748
8
343,336
(275,205)
68,139
161,114
8
305,809
(190,723)
115,094
191,842
$
$
Table of Contents
Revenue
Perpetual license
Subscription
Software support and services
Total revenue
Cost of revenue
Perpetual license
Subscription
Software support and services
Total cost of revenue
Gross profit
Operating expenses:
MOBILEIRON,
INC.
CONSOLIDATED
STATEMENTS
OF
OPERATIONS
(In
thousands,
except
per
share
data
)
Year
ended
December
31,
2014
2015
2013
$
53,512
48,080
47,706
149,298
$
66,816
30,227
35,252
132,295
$
69,810
15,085
20,679
105,574
2,881
7,181
18,115
28,177
121,121
61,871
105,520
36,037
1,049
4,448
5,719
13,868
24,035
108,260
46,278
99,870
22,400
—
—
—
782
—
204,477
(83,356)
274
(83,630)
852
(84,482)
(1.07)
78,755
$
$
169,330
(61,070)
302
(61,372)
517
$ (61,889)
$
(1.30)
3,327
3,684
9,489
16,500
89,074
36,400
68,309
12,081
—
208
3,925
120,923
(31,849)
396
(32,245)
252
$ (32,497)
$
(3.27)
47,517
9,953
Research and development
Sales and marketing
General and administrative
Restructuring charge
Amortization of intangible assets
Impairment of in-process research and development
Total operating expenses
Operating loss
Other expense-net
Loss before income taxes
Income tax expense
Net loss
Net loss per share, basic and diluted
Weighted-average shares used to compute net loss per share, basic and diluted
See accompanying notes to the consolidated financial statements
72
Table of Contents
MOBILEIRON,
INC.
CONSOLIDATED
STATEMENTS
OF
STOCKHOLDERS
’
EQUITY
(DEFICIT)
(In
thousands,
except
share
and
per
share
data)
Convertible
Preferred
Stock
Shares
43,636,635
Amount
$ 102,552
Shares
8,939,067
Additional
Paid-in
Amount Capital
$
1 $
8,915
Common
Stock
Accumulated
Deficit
(Deficit)
$
(96,337)
$
(87,421)
Total
Stockholders'
Equity
BALANCE—December 31, 2012
Issuance of common stock for stock
option exercises
Vesting of early exercised stock options
and restricted stock
Issuance of Series F preferred stock at
$9.9550 per share—net of issuance
costs of $127
Stock-based compensation
Net loss
BALANCE—December 31, 2013
Issuance of common stock for stock
option exercises
Vesting of early exercised stock options
and restricted stock
Issuance of Series F preferred stock at
$9.9550 per share—net of issuance
costs of $6
Stock-based compensation
Conversion of preferred stock for initial
public offering
Issuance of common stock for initial
public offering, net of issuance costs of
$4,076
Purchase of Averail Corporation
Net loss
BALANCE—December 31, 2014
Issuance of common stock for stock
option exercises, net of repurchases
Vesting of early exercised stock options
and restricted stock
Issuance of common stock for pursuant to
the Employee Stock Purchase Plan
Vesting of restricted stock units
Stock-based compensation
Net loss
BALANCE—December 31, 2015
—
—
—
—
569,096
1,500,120
—
1
679
946
5,809,437
—
—
57,707
—
—
$ 160,259 11,008,283
—
—
—
$
49,446,072
—
—
—
—
1,044,087
1,400,259
200,903
—
1,994
—
—
—
—
—
—
2 $
—
8,467
—
$
19,007
—
—
—
—
2,280
669
—
16,749
(49,646,975)
(162,253) 49,646,975
5
162,248
— 12,777,777
—
276,463
—
— 76,153,844
—
$
102,874
1,982
1
—
—
—
$
8 $ 305,809
—
2,776,221
—
5,846
—
—
—
—
198,564
—
246
1,273,147
924,461
—
7,359
—
—
— 24,076
—
—
—
—
— $
—
—
—
—
—
—
— $
—
—
—
—
(32,497)
(128,834)
$
—
—
—
—
—
—
—
(61,889)
(190,723)
$
—
—
—
—
—
679
947
—
8,467
(32,497)
(109,825)
2,280
669
—
16,749
162,253
102,875
1,982
(61,889)
115,094
5,846
246
7,359
—
24,076
—
—
—
81,326,237
—
$
8
—
$ 343,336
(84,482)
$
(275,205)
$
(84,482)
68,139
See accompanying notes to the consolidated financial statements
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MOBILEIRON,
INC.
CONSOLIDATED
STATEMENTS
OF
CASH
FLOWS
(I
n
thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Depreciation
Amortization of intangible assets
Provision for doubtful accounts
Impairment of in-process research and development
Loss on disposal of equipment
Amortization of premium on investment securities
Changes in operating assets and liabilities:
Accounts receivable
Other current and noncurrent assets
Accounts payable
Accrued expenses and other long-term liabilities
Deferred revenue
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
Purchases of investment securities
Maturities of investment securities
Purchase of Push Computing, Inc.—net of cash acquired
Purchase of intellectual property
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Amount drawn from revolving line of credit
Repayments of revolving line of credit
Proceeds from the issuance of convertible preferred stock-net of cash issuance costs
Proceeds from initial public offering
Payment of offering costs related to initial public offering
Proceeds from Employee Stock Purchase Plan
Proceeds from exercise of stock options
Net cash provided by financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS—Beginning of period
CASH AND CASH EQUIVALENTS—End of period
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING ACTIVITIES RELATED TO
ACQUISITIONS
Fair value of assets acquired
Liabilities assumed
Issuance of common stock
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
Issuance of shares under the Employee Stock Purchase Plan
Purchase of property and equipment recorded in accounts payable
Tenant improvement allowance recorded in property and equipment and liabilities
Offering costs recorded in accrued liabilities
Year
ended
December
31,
2014
2013
2015
$
(84,482)
$
(61,889)
$
(32,497)
28,791
2,757
870
150
—
—
368
16,749
2,215
1,430
54
—
21
—
(8,148)
(932)
1,414
(5,024)
15,701
(48,535)
(3,730)
(60,913)
44,964
(10,605)
(835)
(12)
2,881
13,422
(36,569)
(3,119)
(36,104)
8,467
1,563
485
(67)
3,925
—
—
(5,996)
(2,713)
147
5,884
(4,748)
(25,550)
(2,244)
—
—
—
(19,679)
—
(650)
(39,873)
(333)
(30)
(2,607)
—
3,300
—
(7,600)
—
1,994
— 106,950
—
(4,076)
4,280
2,308
107,156
30,714
73,573
104,287
$
5,406
5,755
11,161
(57,053)
104,287
$
47,234
595
$
271
— $
—
—
2,276
(294)
(1,982)
$
$
$
$
$
$
$
$
$
$
$
$
$
4,300
—
57,707
—
—
—
1,031
63,038
34,881
38,692
73,573
168
—
—
—
—
—
$
$
7,359
554
1,068
— $
— $
— $
27
$
—
See accompanying notes to the consolidated financial statement s
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Table of Contents
1.
Description
of
Busines
s
and
Significant
Accounting
Policies
Description
of
Business
MobileIron, Inc. and its wholly owned subsidiaries, collectively, the “Company”, “we”, “us” or “our”, provides a
purpose-built mobile IT platform that enables enterprises to manage and secure mobile applications, content and devices while
providing their employees with device choice, privacy and a native user experience. We were incorporated in Delaware in July
2007 and are headquartered in Mountain View, California, with additional sales and support presence in North America, Europe,
the Middle East, Asia and Australia.
Initial Public Offering
In June 2014, we completed our initial public offering, or our IPO, in which we issued and sold 12,777,777 shares of
common stock, including 1,666,666 million shares of common stock sold pursuant to the full exercise of the underwriters’ over-
allotment option, at a price of $9.00 per share. We received aggregate proceeds of $107.0 million from the sale of shares of
common stock, net of underwriters’ discounts and commissions, but before deducting offering expenses of approximately $4.1
million. Upon the closing of the initial public offering, all shares of our outstanding convertible preferred stock automatically
were converted into 49,646,975 shares of common stock.
Basis of Presentation and Consolidation
The accompanying audited consolidated financial statements have been prepared in accordance with U.S. generally
accepted accounting principles, or GAAP, and include the accounts of our wholly owned subsidiaries. Intercompany accounts and
transactions have been eliminated in consolidation.
Stock Split
In May 2014, we amended and restated our amended and restated certificate of incorporation to effect a seven-for-five
reverse stock split of our common stock and convertible preferred stock. On the effective date of the reverse stock split, (i) each
seven shares of outstanding convertible preferred stock and common stock was reduced to five shares of convertible preferred
stock and common stock, respectively; (ii) the number of shares of common stock issuable under each outstanding option to
purchase common stock was proportionately reduced on a seven-for-five basis; (iii) the exercise price of each outstanding option
to purchase common stock was proportionately increased on a seven-for-five basis; and (iv) corresponding adjustments in the per
share conversion prices, dividend rates and liquidation preferences of the convertible preferred stock were made. All of the share
and per share information referenced throughout this Annual Report on Form 10-K and notes to the consolidated financial
statements have been retroactively adjusted to reflect this reverse stock split.
Foreign Currency Translation
Our reporting currency is the U.S. dollar. The functional currency of all our international operations is the U.S. dollar.
All monetary asset and liability accounts are translated into U.S. dollars at the period-end rate, nonmonetary assets and liabilities
are translated at historical exchange rates, and revenue and expenses are translated at the weighted-average exchange rates in
effect during the period. Translation adjustments arising are recorded as foreign currency gains (losses) in the consolidated
statements of operations. We recognized a foreign currency loss of approximately $518,000, $304,000 and $399,000 in 2015,
2014 and 2013, respectively, in other expense—net in our consolidated statements of operations.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. These estimates include, but are not
limited to, revenue recognition, stock-based compensation, goodwill, intangible assets and accounting for income taxes. Actual
results could differ from those estimates.
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Concentrations of Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist of cash, money market funds and
fixed income investments. Although we deposit our cash with multiple financial institutions, our deposits, at times, exceed
federally insured limits. We invest in fixed income securities that are of high-credit quality. Substantially all of our money market
funds, or $18.9 million, are held in two funds that are rated “AAA.”
We generally do not require collateral or other security in support of accounts receivable. Allowances are provided for
individual accounts receivable when we become aware of a customer’s inability to meet its financial obligations, such as in the
case of bankruptcy, deterioration in the customer’s operating results, or change in financial position. If circumstances related to
customers change, estimates of the recoverability of receivables would be further adjusted. We also consider broader factors in
evaluating the sufficiency of our allowances for doubtful accounts, including the length of time receivables are past due,
significant one-time events and historical experience. Activity in our allowance for doubtful accounts was as follow:
Balance as of December 31, 2015
Balance as of December 31, 2014
Balance as of December 31, 2013
Balance
at
Beginning
of
Period
$
$
$
550
492 $
559 $
Bad
Debt
Expense
Write-offs,
Net
of
Recoveries
Balance
at
End
of
Period
150
54 $
(67) $
(72) $
4 $
— $
628
550
492
One reseller accounted for 17% (1% as an end customer), 22% (2% as an end customer) and 23% (3% as an end
customer) of total revenue in 2015, 2014 and 2013, respectively. The same reseller accounted for 14% and 16% of net accounts
receivable as of December 31, 2015 and 2014, respectively.
There were no other resellers or end-user customers that accounted for 10% or more as a percentage of our revenue or
net accounts receivable for any period presented.
Segments
We have one reportable segment
Summary
of
Significant
Accounting
Policies
Revenue Recognition
We derive revenue principally from software-related arrangements consisting of perpetual software licenses, post-
contract customer support for such licenses, or PCS or software support, including when and if available updates, and
professional services such as consulting and training services. We also offer our software as term-based licenses and cloud-based
arrangements. In addition, we install our software on servers that we ship to customers.
We begin to recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or
services have been provided, (iii) the sales price is fixed and determinable, and (iv) collection of the related receivable is
probable. If collection is not considered probable, revenue is recognized only upon collection.
Signed agreements, including by electronic acceptance, are used as evidence of an arrangement. Delivery is considered
to occur when we provide a customer with a link and credentials to download our software. Delivery of a hardware appliance (an
“appliance”) is considered to occur when title and risk of loss has transferred to the customer, which typically occurs when
appliances are delivered to a common carrier. Delivery of services occurs when performed.
Prior to January 1, 2013, we had not established vendor specific objective evidence, or VSOE, of fair value for any of
the elements in our multiple-element arrangements. As of January 1, 2013, we determined that we had sufficient history to
establish VSOE of fair value for PCS and professional services. Prior to January 1, 2013, we did not have VSOE of fair value for
our software-related undelivered elements due to limited history of stand-alone sales transactions and inconsistency in pricing.
We established VSOE of fair value when we had a substantial majority of stand-alone sales
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transactions of software support and services pricing within a narrow pricing band. In our VSOE analysis, we generally include
stand-alone sales transactions completed during a rolling 12 month period unless a shorter period is appropriate due to changes in
our pricing structure.
We typically enter into multiple-element arrangements with our customers in which a customer may purchase a
combination of software on a perpetual or subscription license, PCS, and professional services. The professional services are not
considered essential to the functionality of the software. All of these elements are considered separate units of accounting. Our
standard agreements do not include rights for customers to cancel or terminate arrangements or to return software to obtain
refunds.
We use the residual method to recognize revenue when a perpetual license arrangement includes one or more elements
to be delivered at a future date provided the following criteria are met: (i) VSOE of fair value does not exist for one or more of the
delivered items but exists for all undelivered elements, (ii) all other applicable revenue recognition criteria are met and (iii) the
fair value of all of the undelivered elements is less than the arrangement fee. VSOE of fair value is based on the normal pricing
practices for those products and services when sold separately by us and contractual customer renewal rates for post-contract
customer support services. Under the residual method, the fair value of the undelivered elements is deferred and the remaining
portion of the arrangement fee is recognized as revenue in the period in which it was earned. If evidence of the fair value of one
or more undelivered elements does not exist, then the revenue is deferred and recognized when delivery of those elements occurs,
or when fair value can be established, or ratably over the PCS period if the only undelivered element is PCS—we refer to these
deferred revenue elements as the “Deferred Portion.”
Revenue from subscriptions to our on premise term licenses, arrangements where perpetual and subscriptions to our on
premise term licenses are sold together, and subscriptions to our cloud service are recognized ratably over the contractual term for
all periods presented and are included as a component of subscription revenue within our consolidated statements of operations.
We refer to arrangements where perpetual and subscriptions to our on premise term licenses are sold together as “Bundled
Arrangements.”
Occasionally, we enter into multiple-element arrangements with our customers in which a customer may purchase a
combination of software on a perpetual or term basis, PCS, professional services, and appliances. We generally provide the
appliances and software upon the commencement of the arrangement and provide software-related elements throughout the
support period. We account for appliance-bundled arrangements under the revised accounting standard related to multiple-
element arrangements, Accounting Standard Update, or ASU, No. 2009-13, Multiple Element Arrangements , and determine the
revenue to be recognized based on the standard’s fair value hierarchy and then determine the value of each element in the
arrangement based on the relative selling price of the arrangement. Amounts related to appliances are generally recognized upon
delivery with the remaining consideration allocated to software and software-related elements, which are recognized as described
elsewhere in this policy.
Revenue from PCS is recognized ratably over the support term and is included as a component of software support and
service revenue within the consolidated statements of operations.
Revenue related to professional services is recognized upon delivery and is included as a component of software support
and services revenue within the consolidated statements of operations.
Prior to establishing VSOE of fair value for PCS and professional services on January 1, 2013, we recognized revenue
for multiple element software and software-related arrangements ratably from the date of service commencement over the
contractual term of the related PCS arrangement. After January 1, 2013, the deferred revenue related to these arrangements
continues to be recognized ratably over the remaining contractual term of the PCS arrangement. Approximately $1.8 million,
$5.2 million and $21.1 million of perpetual license revenue in 2015, 2014 and 2013, respectively, related to sales made prior to
January 1, 2013. Approximately $300,000 and $2.1 million deferred revenue as of December 31, 2015 and 2014, respectively,
related to sales made prior to January 1, 2013.
We allocated the revenue from all multiple-element arrangements entered into prior to the establishment of VSOE of fair
value for our PCS and professional services to each respective revenue caption using our best estimate of value of each element
based on the facts and circumstances of the arrangements, our go-to-market strategy, price list and
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discounts from price list as applicable. We believe that the allocation between the revenue captions allows for greater
transparency and comparability of revenue from period to period even though VSOE of fair value may not have existed at that
time.
Appliance revenue was less than 10% of total revenue for all periods presented and is included as a component of
perpetual license revenue within the consolidated statements of operations.
Generally, sales made through resellers are fulfilled to the end customer and processed in the same period. Inventory of
the licenses held by the resellers was immaterial for all periods presented.
Shipping charges and sales tax billed to partners are excluded from revenue.
Sales commissions and other incremental costs to acquire contracts are also expensed as incurred and are recorded in
sales and marketing expense.
For all arrangements, any revenue that has been deferred and is expected to be recognized beyond one year is classified
as long-term deferred revenue in the consolidated balance sheets.
Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of
December 31, 2015 and 2014, cash and cash equivalents consisted of cash deposited with banks, money market funds and
investments that mature within three months of their purchase.
Held-To-Maturity Investments
We determine the appropriate classification of our fixed income investments at the time of purchase and reevaluate their
classifications each reporting period. Investments are classified as held-to-maturity since the Company has positive intent and the
ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost.
Comprehensive Loss
Comprehensive loss includes all changes in equity (net assets) during a period from non-owner sources. In 2015, 2014
and 2013, there were no differences between net loss and comprehensive loss. Therefore, the consolidated statements of
comprehensive loss have been omitted.
Net Loss per Share of Common Stock
Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common
shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is
computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities
outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per
share calculation, convertible preferred stock, unvested restricted stock, restricted stock units and stock options are considered to
be potentially dilutive securities. Because we have reported a net loss for 2015, 2014 and 2013, the number of shares used to
calculate diluted net loss per common share is the same as the number of shares used to calculate basic net loss per common share
for those periods presented because the potentially dilutive shares would have been anti-dilutive if included in the calculation.
Inventory
We have appliances (industry standard hardware servers available from multiple vendors) that are available for
customers to purchase, on which we preinstall our software prior to shipment. Inventory is stated at the lower of cost or net
realizable value. We value our inventory using the first-in, first-out method. Appropriate consideration is given to obsolescence,
excessive levels, deterioration and other factors in evaluating net realizable value—such adjustments were not material for any
period presented. The entire inventory is comprised of finished goods. As of December 31, 2015 and
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2014, we had inventory of $309,000 and $528,000 , respectively, which is included in prepaid expenses and other current assets in
the consolidated balance sheets.
Software Development Costs Incurred in Connection with Software to be Sold or Marketed
The costs to develop new software products and enhancements to existing software products are expensed as incurred
until technological feasibility has been established. We consider technological feasibility to have occurred when all planning,
designing, coding and testing have been completed according to design specifications. Once technological feasibility is
established, any additional costs would be capitalized. We believe our current process for developing software is essentially
completed concurrent with the establishment of technological feasibility, and accordingly, no costs have been capitalized.
Internal Use Software
We capitalize costs incurred during the application development stage related to our internally used software. Such costs
are primarily incurred by third-party vendors and consultants. Costs related to preliminary project activities and post-
implementation activities are expensed as incurred. Amounts capitalized in all periods presented were not significant.
All software development costs incurred in connection with our cloud offering, or SaaS, are also sold or marketed to
partners or end customers, therefore we start capitalizing costs when technological feasibility is achieved. No costs were
capitalized in any periods presented as we believe that our current process for developing software is essentially completed
concurrent with the establishment of technological feasibility.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated
useful life of the property and equipment, determined to be three years for computers and equipment and software, five years for
furniture and fixtures, and the lesser of the remaining lease term or estimated useful life for leasehold improvements.
Expenditures for repairs and software support are charged to expense as incurred. Upon disposition, the cost and related
accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected as operating expenses in the
consolidated statements of operations.
Goodwill and Intangible Assets
We record the excess of the acquisition purchase price over the fair value of the tangible and identifiable intangible
assets acquired as goodwill. We perform an impairment test of our goodwill in the third quarter of our fiscal year, or more
frequently if indicators of potential impairment arise. We have a single reporting unit and consequently evaluate goodwill for
impairment based on an evaluation of the fair value of the Company as a whole. We record purchased intangible assets at their
respective estimated fair values at the date of acquisition. Purchased intangible assets are being amortized using the straight-line
method over their remaining estimated useful lives, which range from three to five years. We evaluate the remaining useful lives
of intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining
estimated amortization period.
We have determined that our intangible assets have not been impaired during the years ended December 31, 2015 and
2014 . In 2013, we abandoned an in-process research and development project and recorded a $3.9 million impairment loss.
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Long-Lived Assets with Finite Lives
Long-lived assets are reviewed for possible impairment whenever events or circumstances indicate that the carrying
amount of these assets may not be recoverable. We evaluate the recoverability of each of our long-lived assets, including
purchased intangible assets and property and equipment, by comparison of its carrying amount to the future undiscounted cash
flows we expect the asset to generate. If we consider the asset to be impaired, we measure the amount of any impairment as the
difference between the carrying amount and the fair value of the impaired asset.
Stock-Based Compensation
We use the estimated grant-date fair value method of accounting in accordance with Accounting Standards Codification,
or ASC, Topic 718 Compensation—Stock Compensation . Fair value is determined using the Black-Scholes Model using various
inputs, including our estimates of expected volatility, term and future dividends. We estimated the forfeiture rate in 2015, 2014
and 2013 based on our historical experience for annual grant years where the majority of the vesting terms have been satisfied.
We recognize compensation costs for awards with service and performance vesting conditions and for our Employee Stock
Purchase Plan, or ESPP, on an accelerated method over the requisite service period of the award. For stock options or restricted
stock grants with no performance condition, we recognize compensation costs on a straight-line basis over the requisite service
period of the award, which is generally the vesting term of four years.
Research and Development
Research and development, or R&D, costs are charged to expense as incurred.
Advertising
Advertising costs are expensed and included in sales and marketing expense when incurred. Advertising expense in
2015, 2014 and 2013 was $256,000 , $526,000 and $560,000 , respectively.
Income Taxes
We account for income taxes in accordance with ASC Topic 740, Income Taxes , under which deferred tax liabilities and
assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying
amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected to be realized.
We use a recognition threshold and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. A tax position is recognized when it is more likely than not that the tax
position will be sustained upon examination, including resolution of any related appeals or litigation processes. A tax position that
meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely
of being realized upon ultimate settlement with a taxing authority. The standard also provides guidance on derecognition of tax
benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transition.
Recent
Accounting
Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB,
or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of
recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations
upon adoption.
In May 2014, the FASB, jointly with the International Accounting Standards Board, issued a comprehensive new
standard on revenue recognition from contracts with customers. The standard’s core principle is that a reporting entity will
recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. In applying this new guidance to contracts within its
scope, an entity will: (1) identify the contract(s) with a customer, (2) identify the
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performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance
obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, this
new guidance will require significantly expanded disclosures about revenue recognition. As clarified by the FASB on July 9,
2015, provisions of this new standard are effective for annual reporting periods (including interim reporting periods within those
annual periods) beginning after December 15, 2017. Early adoption is permitted for annual reporting periods (including interim
reporting periods within those annual periods) beginning after December 15, 2016. Entities have the option of using either a full
retrospective or a modified retrospective approach to adopt this new guidance. We are currently evaluating the potential effect on
our consolidated financial statements from adoption of this standard.
In November 2015, the FASB issued Accounting Standard Update, or ASU, 2015-17, “Balance Sheet Classification of
Deferred Taxes”, which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and
liabilities be classified as non-current in a statement of financial position. We early adopted ASU 2015-17 effective December 31,
2015 on a prospective basis. Due to the valuation allowances recorded against our deferred tax assets, adoption of this ASU
resulted in no net impact to our Consolidated Balance Sheet as of December 31, 2015.
2.
Significant
Balance
Sheet
Components
Property
and
Equipment
—Property and equipment at December 31, 2015 and 2014 consisted of the following (in
thousands):
Computers and appliances
Purchased software
Furniture and fixtures
Leasehold improvements
Total property and equipment
Accumulated depreciation and amortization
Total property and equipment—net
As
of
December
31,
2015
2014
$
$
7,908 $
2,220
1,338
2,887
14,353
(7,781)
6,572 $
6,405
1,698
182
717
9,002
(5,024)
3,978
Accrued
Expenses
—Accrued expenses at December 31, 2015 and 2014 consisted of the following (in thousands):
Accrued commissions
Accrued stock-settled bonus
Accrued vacation
Employee Stock Purchase Plan liability
Other accrued payroll-related expenses
Liability for early exercised stock options (Note 11)
Other accrued liabilities
Total accrued expenses
81
As
of
December
31,
2014
2015
4,181
4,714
512
2,329
2,483
48
4,929
19,196
$
$
6,199
—
3,589
4,280
2,231
294
4,576
21,169
$
$
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Deferred
Revenue
—Current and noncurrent deferred revenue at December 31, 2015 and 2014 consisted of the
following (in thousands):
Perpetual license
Subscription
Software support
Professional services
Total current and noncurrent deferred revenue
As
of
December
31,
2015
2014
400 $
25,013
42,254
2,208
69,875 $
3,045
19,981
29,213
1,935
54,174
$
$
Included in deferred perpetual license revenue is $ 300,000 and $2.1 million at December 31, 2015 and 2014,
respectively, of revenue deferred for multiple element software license arrangements billed prior to January 1, 2013 for which we
did not recognize revenue immediately due to lack of VSOE of fair value for software support and services. See Note 1 entitled
“Description of Business and Significant Accounting Policies” in Item 8, “Financial Statements and Supplementary Data,” of Part
II of this Annual Report on Form 10-K.
3
.
Fair
Value
Measurement
With the exception of our held-to-maturity fixed income investments, we report financial assets and liabilities and
nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a
recurring basis in accordance with ASC 820 (formerly FASB Statement No. 157, Fair Value Measurements ). ASC 820 defines
fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are
required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the
market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as
inherent risk, transfer restrictions and credit risk.
ASC 820 also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair
value into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is available and significant to the fair value measurement. ASC 820 establishes and prioritizes three levels of inputs that
may be used to measure fair value:
·
·
·
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted
prices that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for
substantially the full term of the financial instruments.
Level 3—Inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair
value. The inputs require significant management judgment or estimation.
Our financial assets that are carried at fair value include cash and money market funds. We had no financial liabilities, or
nonfinancial assets and liabilities that were required to be measured at fair value on a recurring basis, or that were measured at
fair value as of December 31, 2015 or 2014.
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Our financial instruments measured at fair market value as of December 31, 2015 and 2014 were as follows:
(in thousands)
Money market funds
Corporate debt securities
Commercial paper
Securities and obligations of U.S. government agencies
As
of
December
31,
2015
Level
1 Level
2 Level
3 Total
$ 18,850
— $
$
—
—
—
28,520
24,187
12,426
$ 65,133
— $ 18,850
— 28,520
— 24,187
— 12,426
— $ 83,983
Total
$ 18,850
$
(in thousands)
Money market funds
Corporate debt securities
Commercial paper
Securities and obligations of U.S. government agencies
Total
4
.
Investments
As
of
December
31,
2014
Level
1 Level
2 Level
3 Total
$ 77,522
— $
$
—
—
—
19,738
16,393
13,636
$ 49,767
$ 77,522
— $ 77,522
— 19,738
— 16,393
— 13,636
— $ 127,289
Our portfolio of fixed income securities consists of commercial paper, corporate debt securities and securities and
obligations of U.S. government agencies. All our investments in fixed income securities are classified as held-to-maturity. These
investments are carried at amortized cost.
Our investments in fixed income securities as of December 31, 2015 were as follows:
(In thousands)
Corporate debt securities
Commercial paper
Securities and obligations of U.S. government agencies
Total
(In thousands)
Corporate debt securities
Commercial paper
Securities and obligations of U.S. government agencies
Total
As
of
December
31,
2015
Amortized
cost
Gains
Losses
$
$
28,549
24,187
12,431
65,167
$
$
$
1
1
—
$
2
Fair
Value
28,520
24,187
12,426
65,133
(30)
(1)
(5)
(36)
$
$
Amortized
cost
19,756
16,391
13,641
49,788
$
$
As
of
December
31,
2014
Gains
Losses
3
2
2
7
$
$
$
$
83
Fair
Value
19,738
16,393
13,636
49,767
$
(21)
—
(7)
(28)
$
Table of Contents
The following table summarizes the balance sheet classification of our investments:
(In thousands)
Cash equivalents
Short-term investments
Long-term investments
Total investments
As
of
December
31,
2015
13,499 $
49,574
2,094
65,167
$
2014
13,699
13,869
22,220
49,788
$
$
The gross amortized cost and estimated fair value of our held-to-maturity investments at December 31, 2015 by
contractual maturity are shown below. Actual maturities may differ from contractual maturities because the issuers of the
securities may have the right to prepay obligations without prepayment penalties.
(In thousands)
Due in one year or less
Due after one year through five years
Total
As
of
December
31,
2015
2014
Gross
Amortized
Cost
$ 63,073
2,094
$ 65,167
Gross
Amortized
Cost
Fair
Value
$ 63,040 $ 27,568
2,093 22,220
$ 65,133 $ 49,788
Fair
Value
$
27,565
22,202
49,767
$
We monitor our investment portfolio for impairment on a periodic basis. In order to determine whether a decline in fair
value is other-than-temporary, we evaluate, among other factors: the duration and extent to which the fair value has been less than
the carrying value; our financial condition and business outlook, including key operational and cash flow metrics, current market
conditions and future trends in our industry; our relative competitive position within the industry; and our intent and ability to
retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. A decline in the fair value
of the security below amortized cost that is deemed other-than-temporary is charged to earnings, resulting in the establishment of
a new cost basis for the affected securities. In 2015, we had an insignificant amount of unrealized gains or losses, and we did not
recognize any other-than-temporary impairments .
5.
Acquisitions
In November 2014, we purchased developed technology for $650,000 to enhance our product portfolio, which we
capitalized in intangible assets—net on the accompanying balance sheet and expect to amortize on a straight-line basis over its
estimated useful life of three years.
In April 2014, we completed the acquisition of certain assets of Averail Corporation, or Averail, a privately-held content
security-oriented software company, for 276,463 shares of common stock and the assumption of certain liabilities. The assets
acquired will provide additional features in our Docs@Work product. Included in the total, 43,612 shares subject to a holdback
provision for standard representations and warranties were released in October 2015. The aggregate purchase price of the
transaction was approximately $2.0 million, net of liabilities assumed. In connection with this acquisition, 103,231 of these shares
were distributed to entities affiliated with Storm Ventures, and 103,232 of these shares were issued to entities affiliated with
Foundation Capital, subject to certain holdback provisions. The Storm Ventures entities and the Foundation Capital entities each
collectively hold more than 5% of our capital stock. In addition, Tae Hea Nahm, an affiliate of Storm Ventures, serves on our
board of directors and was a director of Averail prior to its acquisition. The aggregate value of the securities issued to our
investors was approximately $1.5 million.
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The total consideration for this transaction was approximately $2.0 million and consisted of the following (in thousands
except share data):
Common stock issued (232,854 shares)
Holdback common stock (43,612 shares)
Total consideration
$
$
1,670
312
1,982
Transaction costs associated with the acquisition were $167,000 , all of which we expensed in 2014, and are included in
general and administrative expense in the accompanying consolidated statements of operations .
We accounted for the Averail acquisition as a business combination. The assets acquired and liabilities assumed were
recorded at fair market value. The excess of the purchase price over the fair value of the net tangible and identifiable intangible
assets acquired was recorded as goodwill. The goodwill generated from this business combination was primarily related to value
placed on the employee workforce and expected synergies. Goodwill for all acquisitions is not amortized and is not deductible for
tax purposes.
The purchase price was allocated as follows (in thousands):
Technology – intangible asset
Goodwill
Liabilities assumed
Net assets acquired
$
$
1,600
676
(294)
1,982
The technology intangible asset is being amortized on a straight-line basis over a period of four years and is reported,
net of accumulated amortization, in the accompanying consolidated balance sheet as of December 31, 2015. Amortization
expense related to the intangible asset was $400,000 and $300,000 in 2015 and 2014, respectively, and was included in cost of
revenue.
The amount of revenue and earnings from the acquisitions are included in the condensed consolidated statements of
operations and pro forma results of operations for the acquisition have not been presented because the effect of the acquisition
was not significant to our financial results.
6
.
Goodwill
and
Intangibles
The following table reflects intangible assets subject to amortization as of December 31, 2015 and 2014 (in thousands):
Technology
Total
Technology
Total
As
of
December
31,
2015
Gross
Carrying
Accumulated
Net
Book
Amount
Amortization
Impairment
Value
3,080
3,080 $
$
(1,819)
(1,819) $
—
— $
1,261
1,261
As
of
December
31,
2014
Gross
Carrying Accumulated
Net
Book
Amount
Amortization Impairment Value
3,080
3,080
$
(948)
(948)
$
—
— $
2,132
2,132
$
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Amortization of the technology intangible assets was recorded in cost of revenue.
The weighted average remaining life of our intangible assets on December 31, 2015 was 2.1 years.
Estimated remaining intangible assets amortization expense for the next five years as follows (in thousands):
Year
2016
2017
2018
2019
Total
At December 31, 2015, 2014 and 2013, the carrying value of goodwill was as follows (in thousands):
Balance , December 31, 2013
Additions
Balance , December 31, 2014
Additions
Balance, December 31, 2015
7.
Restructuring
Charge
616
545
100
—
1,261
4,799
676
5,475
—
5,475
$
$
$
In 2015, we completed a business restructuring plan to reduce our cost structure through a workforce reduction and
recorded all amounts associated with the restructuring plan as an expense.
Restructuring costs, recorded in operating expenses, totaled $1.0 million for year ended December 31, 2015.
The following table summarizes the restructuring activities during the year ended December 31, 2015 (in thousands):
Balance, December 31, 2014
Provision for restructuring charges
Cash payments
Balance, December 31, 2015
8.
Line
of
Credit
Severance
and
Related
Costs
—
1,049
(1,049)
—
$
$
We have a $20.0 million revolving line of credit with a financial institution that can be used to (a) borrow for working
capital and general business requirements, (b) issue letters of credit, and (c) enter into foreign exchange contracts. Amounts
borrowed accrue interest at a floating per annum rate equal to the prime rate. A default interest rate shall apply during an event of
default at a rate per annum equal to 5% above the otherwise applicable interest rate. The line of credit is collateralized by
substantially all of our assets, except intellectual property, and requires us to comply with working capital, net worth and other
covenants, including limitations on indebtedness and restrictions on dividend distributions, among others, and the borrowing
capacity is limited to eligible accounts receivable. We are required to maintain an adjusted quick ratio (defined as the ratio of
current assets to current liabilities minus deferred revenue) of at least 1.25 .
In 2014, we withdrew $3.3 million and repaid $7.6 million under our line of credit. There were no outstanding amounts
under the line of credit at December 31, 2015 and 2014.
In May 2015, we issued a letter of credit for $1.5 million as a security deposit for a new Mountain View facility lease
thereby reducing the borrowing capacity under our line of credit to $18.5 million.
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Table of Contents
In July 2015, we amended our revolving line of credit and extended its maturity date to August 20 1 7.
As of December 31, 2015 and 2014, we were in compliance with all financial covenants.
9.
Preferred
Stock
Upon completion of our IPO in June 2014, all shares of our issued and outstanding convertible preferred stock were
automatically converted into 49,646,975 shares of common stock.
We amended and restated our certificate of incorporation in June 2014 to authorize the future issuance of up to
10,000,000 shares of convertible preferred stock. No shares of convertible preferred stock were issued and outstanding as of
December 31, 2015.
In January 2014, we issued 200,903 shares of Series F for net cash proceeds of $2.0 million.
The following table summarizes information regarding our convertible preferred stock by class immediately prior to the
IPO (in thousands, except share and per share data) :
Shares
Per
share Aggregate
liquidation liquidation Carrying
Series A
Series B
Series C
Series D
Series E
Series F
Total
10.
Common
Stock
value
9,302 $
Authorized Outstanding preference preference
18,604,666 13,289,037 $
16,225,758 11,589,825
13,281,250 9,486,602
6,550,505 4,678,927
6,429,159 4,592,244
8,414,493 6,010,340
69,505,831 49,646,975
9,222
10,929
16,860
19,945
45,596
59,701
$ 162,828 $ 162,253
10,977
17,000
20,000
45,716
59,833
0.70 $
0.95
1.79
4.27
9.96
9.96
We were authorized to issue 300,000,000 shares of common stock with a par value of $0.0001 per share as of December
31, 2015 and 2014. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive
dividends from funds available, when and if declared by the board of directors, subject to the approval and priority rights of
holders of all classes of preferred stock outstanding.
As of December 31, 2015 and 2014, we reserved shares of common stock for issuance as follows:
Options outstanding
Unvested restricted stock units outstanding
Unvested restricted stock outstanding
Unvested early exercised stock options
Shares available for grant under Equity Incentive Plan and Inducement Plan
Shares available for purchase under Employee Stock Purchase Plan
Total
11.
Share
Based
Awards
2008 Plan
As
of
December
31,
2015
11,498,747
7,832,962
—
12,428
6,672,236
1,561,929
27,578,302
2014
16,435,568
478,789
93,805
117,187
7,392,158
2,071,428
26,588,935
The 2008 Stock Plan, or 2008 Plan, which expired on June 12, 2014, provided for the grant of incentive and nonstatutory
stock options to employees, nonemployee directors and consultants of the Company. Options granted under the 2008 Plan
generally become exercisable within three to four years following the date of grant and expire 10 years from the date of grant.
When options are subject to our repurchase right, we may buy back any unvested shares at their original exercise price in the
event of an employee’s termination prior to full vesting.
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Our 2008 Plan was terminated following the date our 2014 Equity Incentive Plan, or the 2014 Plan, became effective.
Any outstanding stock awards under our 2008 Plan will continue to be governed by the terms of our 2008 Plan and applicable
award agreements.
2014 Equity Incentive Plan
Our board of directors adopted our 2014 Plan on April 17, 2014, and our stockholders subsequently approved the 2014
Plan on May 27, 2014. The 2014 Plan became effective on the date that our registration statement was declared effective by the
SEC. The 2014 Plan is the successor to and continuation of our 2008 Plan. Upon the effective date of the 2014 Plan, no further
grants can be made under our 2008 Plan.
Our 2014 Plan provides for the grant of incentive stock options, or ISOs, within the meaning of Section 422 of the
Internal Revenue Code, or the Code, to our employees and our parent and subsidiary corporations’ employees, and for the grant of
nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-
based stock awards, and other forms of equity compensation to our employees, directors and consultants. Additionally, our 2014
Plan provides for the grant of performance cash awards to our employees, directors and consultants.
The initial number of shares of our common stock available to be issued under our 2014 Plan was 8,142,857 , which
number of shares will be increased by any shares subject to stock options or other stock awards granted under the 2008 Plan that
would have otherwise returned to our 2008 Plan (such as upon the expiration or termination of a stock award prior to vesting), not
to exceed 16,312,202 .
T he number of shares of our common stock reserved for issuance under our 2014 Plan will automatically increase on
January 1 of each year, beginning on January 1, 2015 and continuing through and including January 1, 2024, by 5% of the total
number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares
determined by our board of directors. On January 1, 2015, we increased the number of shares of common stock reserved for
issuance under our 2014 Plan by 3,818,242 shares.
Amended and Restated 2015 Inducement Plan
On December 20, 2015, our board of directors adopted our 2015 Inducement Plan , or the Inducement Plan , to reserve
1,600,000 shares of our common stock to be used exclusively for grants of awards to individuals that were not previously
employees or directors of the Company . T he terms and conditions of the Plan are substantially similar to our stockholder-
approved 2014 Plan. No shares were outstanding under the Inducement Plan on December 31, 2015.
On January 5, 2016 our board of directors approved the amendment and restatement of the Inducement Plan to increase
the share reserve under the Inducement Plan to 1,970,000 shares of our common stock.
On January 6 , 2016, Barry Mainz was appointed as our President and Chief E xecutive Officer and a Class I D irector.
Pursuant to Mr. Mainz’s employment agreement, the Compensation Committee of the B oard granted Mr. Mainz an award
of 200,000 restricted stock units (the “First
RSU
Award”
). One hundred percent (100%) of the shares under the First RSU
Award will vest and be issuable on the second anniversary of his January 6, 201 6 start date, subject to Mr. Mainz’s continued
service wit h the Company. Additionally, the Co mpensation Committee of the B oard granted Mr. Mainz an award of 560,000
restricted stock units (the “ Second
RSU
Award
”). Fourteen forty-eighth (14/48th) of the shares under the Second RSU Award
will vest and be issuable on February 20, 2017, 1/16 th of the shares under the Second RSU Award will vest and be issuable on
each of the next 11 of the our standard quarterly vesting dates (May 20, August 20, November 20 and February 20) thereafter, and
1/48 th of the shares under the Second RSU Award will vest and be issuable on February 20, 2020, subject to Mr. Mainz’s
continued service with the Company. The RSU Awards will be subject to the terms of the Inducement Plan and applicable RSU
award agreements.
On February 9, 2016, as a material inducement to Mr. Mainz’s employment, the Compensation Committee of the Board
grant ed to Mr. Mainz an option to purchase 840,000 shares of the Company’s Common Stock with an exercise price equal to the
fair market value of a share of Common Stock on the date of grant. One-fourth (1/4th) of the option to purchase 840,000 shares
will vest and become exercisable on the first an niversary of the January 6, 2016 start date, and 1/48th of such shares will vest and
become exercisable at the end of each one -month period thereafter, subject to
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Mr. Mainz’s continued service with the Company. The options are subject to the terms of the Inducement Plan and applicable
option agreement.
In addition, if within 90 days following the January 6, 201 6 start date, Mr. Mainz purchases Common Stock of the
Company in open market purchases, then the Compensation Committee of the Board will grant Mr. Mainz an option to purchase a
number of shares of Common Stock of the Company equal to the number of shares purchased by Mr. Mainz in such open market
purchases up to an aggregate amount of $500,000 , with an exercise price equal to the fair market value of a share of Common
Stock on the date of grant. One-fourth (1/4th) of the options granted under this provision will vest and become exercisable on the
first anniversary of the date of grant of such option, and1/48th of such shares will vest and become exercisable at the end of each
one -month period thereafter, subject to Mr. Mainz’s continued service with the Company. The options will be subject to the
terms of the Company’s 2014 Equity Incentive Plan and applicable option agreement.
2014 Employee Stock Purchase Plan
Our board of directors adopted our 2014 Employee Stock Purchase Plan, or ESPP, on April 17, 2014, and our
stockholders subsequently approved the ESPP on May 27, 2014. The ESPP became effective immediately upon the execution and
delivery of the underwriting agreement related to our IPO. The purpose of the ESPP is to secure the services of new employees, to
retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward our
success and that of our affiliates. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of
Section 423 of the Code. The ESPP permits eligible employees to purchase our common stock through payroll deductions, which
may not exceed 15% of the employee’s base compensation. Stock may be purchased under the plan at a price equal to 85% of the
fair market value of our common stock on either the first day of the offering or the last day of the applicable purchase period,
whichever is lower.
The initial number of shares of our common stock initially reserved for issuance under our ESPP was 2,071,428 shares.
The number of shares of our common stock reserved for issuance under our ESPP will increase automatically each year,
beginning on January 1, 2015 and continuing through and including January 1, 2024, by the lesser of (i) 1% of the total number
of shares of our common stock outstanding on December 31 of the preceding calendar year; (ii) 2,142,857 shares of common
stock; or (iii) such lesser number as determined by our board of directors. Shares subject to purchase rights granted under our
ESPP that terminate without having been exercised in full will not reduce the number of shares available for issuance under our
ESPP. On January 1, 2015, we increased the number of shares available for issuance under the ESPP by 763,648 shares.
Restricted Stock and Restricted Stock Units
Restricted stock activity in 2013, 2014 and 2015 was as follows:
Unvested, December 31, 2012
Granted
Vested
Unvested, December 31, 2013
Granted
Vested
Cancelled/Forfeited
Unvested, December 31, 2014
Granted
Vested
Cancelled/Forfeited
Unvested, December 31, 2015
Restricted
Stock
Time
-
and
-
Time
-
based performance
based
shares
1,460,413
—
(573,695)
886,718
16,294
(491,313)
(350,440)
61,259
—
(41,137)
(20,122)
—
shares
1,278,912
—
(247,010)
1,031,902
—
(586,204)
(413,152)
32,546
—
(32,546)
—
—
Total
shares
2,739,325
—
(820,705)
1,918,620
16,294
(1,077,517)
(763,592)
93,805
—
(73,683)
(20,122)
—
For stock-based compensation expense, we measure the value of the restricted stock based on the fair value of our
common stock on the date of grant. Our restricted stock grants may be subject to service only or service and
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Table of Contents
performance-based vesting conditions. We expense the fair value of restricted stock grants with service only vesting conditions on
a straight-line basis over the vesting period of the awards.
For shares subject to service and performance conditions, we evaluate the probability of meeting the vesting conditions
at the end of each reporting period to determine how much compensation expense to record. We amortize the fair value, net of
estimated forfeitures, as stock-based compensation expense using the graded vesting method over the vesting periods of the
awards. To the extent that actual results or updated estimates differ from our original estimates, the cumulative effect on current
and prior periods of those changes will be recorded in the period those estimates are revised.
In 2014 we began granting restricted stock units under our 2014 Plan. For stock-based compensation expense, we
measure the value of the restricted stock units based on the fair value of our common stock on the date of grant. Our restricted
stock unit grants are subject to service conditions and we expense the fair value of those shares on a straight-line basis over their
vesting periods.
Our restricted stock unit activity for 2015 was as follows:
Unvested, December 31, 2013
Granted
Vested
Cancelled/Forfeited
Unvested, December 31, 2014
Granted
Vested
Cancelled/Forfeited
Unvested, December 31, 2015
Bonus Plans
Restricted
Stock
Units
Weighted-
Average
Grant
Date
Fair
Value
Number
of
Shares
— $
480,456
—
(1,667)
478,789
9,932,561
(924,461)
(1,653,927)
7,832,962
$
$
—
9.45
—
9.18
9.45
6.92
—
8.06
6.66
In February 2015, our board of directors approved the 2015 Executive Bonus Plan and 2015 Non-Executive Bonus Plan,
or Bonus Plans, each effective as of January 1, 2015. In September 2015 the Compensation Committee amended the 2015 Non-
Executive Bonus Plan. The Non-Executive Bonus Pla n was funded based on the achievement of certain Company metrics.
On February 22, 2016 our Compensation Committee approved issuance of 1, 655 , 537 shares of common stock under
2015 Non-Executive Bonus Plan. Shares of common stock under 2015 Non-Executive Bonus Plan will be issued in shares of
unrestricted common stock later in February 2016. No shares will be issued under the 2015 Executive Bonus Plan. Any shares
issued from the Bonus Plans will reduce the 2014 Plan shares available for issuance. We record stock-based compensation
expense related to the Bonus Plans over the service period of eligible employees based on forecasted performance relative to the
Company metrics. To the extent that updated estimates of bonus expense differ from original estimates, the cumulative effect on
current and prior periods of those changes will be recorded in the period those estimates are revised. In 2015, we recorded $4.7
million of stock-based compensation expense related to the 2015 Non-Executive Bonus Plan .
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Stock Options
Stock opti on activity under the 2008 Plan, 2014 Plan and 2015 Inducement Plan in 2013, 2014 and 2015 was as follows:
Options
Outstanding
Weighted-
Average
Weighted-
Average
Remaining
Contractual
Exercise
Price Term
(Years)
8.78
2.11
$
Aggregate
Intrinsic
Value
(In
thousands)
Aggregate
$
17,329
Number
of
Shares
Available
for Number
of
Shares
10,950,917
—
Issuance
574,597
4,478,151
(4,891,242)
—
1,815,795
108,037
4,891,242
(695,482)
(1,815,795)
—
4.33
1.72
2.55
2,085,338 13,330,882 $
9,913,915
—
(5,373,131)
(480,456)
5,373,131
—
—
(1,089,708)
(1,178,737)
1,178,737
1,667
66,088
7,392,158
5,418,242
(1,089,100)
(9,932,561)
9,019
3,208,006
1,653,927
12,545
6,672,236
16,435,568
—
—
$
—
1,089,100
—
(2,817,915)
(3,208,006)
—
—
11,498,747
7,167,464
11,032,059
2.90
8.38 $
38,339
6.97
2.27
4.55
4.15
6.95
2.12
5.61
4.51
3.55
4.43
7.83
$
95,791
6.86
$
$
6,256
6,202
6,250
Balance—December
31,
2012
Authorized
Granted
Exercised (1)
Canceled
Repurchased
Balance—December
31,
2013
Authorized
Stock options granted
Restricted stock units granted
Exercised (1)
Stock options canceled
Restricted stock units canceled
Repurchased
Balance—December
31,
2014
Authorized
Stock options granted
Restricted stock units granted
Exercised (1)
Stock options canceled
Restricted stock units canceled
Repurchased
Balance—December
31,
2015
Vested and exercisable—
December 31, 2015
Vested and expected to vest (2)
—December 31, 2015
(1)
(2)
Includes early exercises of 42,772 and 126,386 in 2014 and 2013, respectively. In 2015 no shares of common stock were
issued for the exercise of common stock options prior to their vesting dates, or early exercises.
Options expected to vest are net of an estimated forfeiture rate.
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Additional information regarding options outstanding at December 31, 2015 is as follows :
Range
of
exercises
$0.04 — $1.75
$2.90 — $3.70
$3.77 — $5.77
$6.20 — $9.87
$10.8 0 — $ 12.05
Outstanding
at
December
31,
2015
Options
Outstanding
Options
Exercisable
Weighted-
Average
Number
of
Shares
Remaining Weighted-
Contractual
Average
Term
(Years) Exercise
Price
Number
of
Shares
Weighted-
Average
Exercise
Price
2,360,113
2,683,361
3,938,687
2,374,992
141,594
11,498,747
5.04 $
6.09
7.32
8.56
8.53
6.86 $
1.07 2,356,759 $
3.58 2,146,702
5.02 1,920,743
695,741
7.73
11.31
47,519
4.51 7,167,464 $
1.07
3.58
4.83
7.76
11.33
3.55
The aggregate pretax intrinsic value of vested options exercised in 2015, 2014 and 2013 was $11.8 million, $5.4 million
and $1.8 million, respectively. The intrinsic value is the difference between the estimated fair value of the Company’s common
stock at the date of exercise and the exercise price for in-the-money options. The weighted-average grant-date fair value of
options granted in 2015, 2014 and 2013 was $3.04 , $4.09 and $2.46 per share, respectively.
Our stock-based compensation expense was recorded in the following cost and expense categories (in thousands):
Contra-revenue
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total
Determining Fair Value of Stock Options
Year
ended
December
31,
2015
2014
2013
$
— $
123 $
2,774
10,607
9,508
5,902
$ 28,791
1,353
5,980
5,930
3,363
$ 16,749
$
78
327
5,238
1,893
931
8,467
The fair value of each grant of stock options was determined by us using the methods and assumptions discussed below.
Each of these inputs is subjective and generally requires significant judgment to determine.
Expected Term— The expected term of stock options represents the weighted-average period the stock options are expected
to be outstanding. For option grants that are considered to be “plain vanilla”, we have opted to use the simplified method
for estimating the expected term as provided by the Securities and Exchange Commission. The simplified method
calculates the expected term as the average of time-to-vesting and the contractual life of the options.
Expected Volatility— The expected stock price volatility assumption was determined by examining the historical volatilities
of a group of industry peers, as we did not have any trading history for our common stock. We will continue to analyze our
historical stock price volatility and expected term assumptions as more historical data for our common stock becomes
available.
Risk-Free Interest Rate— The risk free rate assumption was based on the U.S. Treasury instruments with terms that were
consistent with the expected term of our stock options.
Expected Dividend— The expected dividend assumption was based on our history and expectation of dividend payouts.
Forfeiture Rate— Forfeitures were estimated based on historical experience.
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Fair Value of Common Stock— Prior to the IPO, t he fair value of the shares of common stock underlying the stock
options was historically been the responsibility of and determined by our board of directors. Because there was no public
market for our common stock, the board of directors determined fair value of common stock at the time of grant of the
option by considering a number of objective and subjective factors including independent third-party valuations of our
common stock, sales of convertible preferred stock to unrelated third parties, operating and financial performance, the lack
of liquidity of capital stock and general and industry specific economic outlook, amongst other factors. Following the
closing of the IPO offering, the fair value of our common stock is determined based on the closing price of our common
stock on the NASDAQ Global Select Market.
We used the Black-Scholes Model to estimate the fair value of our stock options granted to employees with the
following weighted-average assumptions:
Expected dividend yield
Risk-free interest rate
Expected volatility
Expected life (in years)
Year
ended
December
31,
2014
—
2015
—
1.6% - 1.8% 1.7% - 2.1%
43% - 45% 48% - 56%
5.5 - 6.1
5.6 - 6.5
2013
—
1.1% - 1.9%
52% - 53%
5.9 - 6.3
We used the Black-Scholes model to estimate the fair value of our Employee Stock Purchase Plan awards with the
following assumptions:
Expected dividend yield
Risk-free interest rate
Expected volatility
Expected life (in years)
Year
ended
December
31,
2015
—
2014
—
0.1% - 0.7% 0.1% - 0.5%
47% - 49%
34% - 35%
0.7 - 2.2
0.5 - 2
As required by Topic 718 Compensation—Stock Compensation, we estimate expected forfeitures and recognize
compensation costs only for those equity awards expected to vest. O ur stock options granted in 2015 were typically granted with
vesting terms of 48 months.
The following table summarizes our unrecognized stock-based compensation expense as of December 31, 2015 net of
estimated forfeitures:
Stock options
Restricted stock
ESPP
Total
Early Exercise of Common Stock
Unrecognized
Stock-based
Compensation
Expense
(in
millions)
Remaining
Weighted-Average
Recognition
Period
(in
years)
$
$
9.6
40.1
2.5
52.2
1.8
3.2
0.7
In 2014 and 2013 we issued 42,772 shares and 126,386 shares, respectively, of common stock for the exercise of
common stock options prior to their vesting dates, or early exercises. In 2015 no shares of common stock were issued for the
exercise of common stock options prior to their vesting dates, or early exercises. Cash received from all such early exercises of
stock options is recorded in accrued expenses on the consolidated balance sheets and reclassified to stockholders’ equity as the
options vest. The unvested shares are subject to our repurchase right at the original purchase price.
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As of December 31, 2015 and 2014 there were 12,428 and 117,187 shares, respectively, legally outstanding, but not
included within common stock outstanding for accounting purposes as a result of the early exercise of common stock options
which were not yet vested.
As of December 31, 2015 and 2014, the aggregate price of shares subject to repurchase recorded in accrued expenses
totaled $48,000 and $294,000 , respectively.
12.
Employee
Benefit
Plan
We maintain a defined contribution 401(k) plan. The plan covers all full-time U.S. employees over the age of 21 . Each
employee can contribute up to $18,000 annually. We have the option to provide matching contributions, but have not done so to
date.
13.
Commitments
and
Contingencies
Operating Leases
We lease our office facilities under noncancelable agreements expiring between 2014 and 2023. Rent expense in 2015,
2014 and 2013 was $4.7 million and $2.6 million and $1.6 million, respectively. The aggregate future minimum lease payments
under the agreements are as follows (in thousands):
Year
2016
2017
2018
2019
2020
Thereafter
Total
Litigation
$
$
6,172
5,492
4,159
4,033
3,370
6,603
29,829
On November 14, 2012, Good Technology filed a lawsuit against us in federal court in the Northern District of
California alleging false and misleading representations concerning their products and infringement of four patents held by them.
In the complaint, Good Technology sought unspecified damages, attorney’s fees and a permanent injunction. On March 1, 2013,
we counterclaimed against Good Technology for patent infringement of one of our patents, seeking similar relief. On October 13,
2014, the court issued a claims construction order. Good Technology responded by filing additional patent infringement suits
against us in Delaware, the UK and Germany, as well as inter partes review proceedings. In each of these proceedings, Good
Technology sought to invalidate our patents and/or receive injunctive relief, as well as attorney’s fees. We counterclaimed against
Good Technology in the Delaware case on two of our next generation patents and sought relief similar to what Good Technology
was seeking in that case. The Delaware case was transferred to the Northern District of California on March 27, 2015. On June
30, 2015, the court in the original Northern District of California case issued a summary judgment order invalidating the asserted
claims of one of Good Technology’s patents and holding that we did not infringe that patent as a matter of law. On August 4,
2015, a jury in the original Northern District of California case found that two of the three remaining Good Technology patents
that were asserted in the case were invalid and that we did not infringe any of the three patents. The jury also found that while
Good Technology did not infringe our asserted patent, our patent was not invalid. As a result, neither we nor Good Technology
was awarded damages in the case.
On November 2, 2015, Blackberry announced that it had acquired Good Technology. On December 1, 2015, we and
Good Technology announced a settlement of the global litigation between us, which included a narrow, non-material license
agreement between us and Good Technology and a mutual dismissal of claims.
On May 1, 2015, a purported stockholder class action lawsuit was filed in the United States District Court for the
Northern District of California against the Company and certain of its officers, captioned Panjwani v. MobileIron,
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Inc., et al. The action is purportedly brought on behalf of a putative class of all persons who purchased or otherwise acquired the
Company’s securities between February 13, 2015 and April 22, 2015. It asserts claims for violation of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934.The complaint seeks, among other things, compensatory damages and attorney’s fees and
costs on behalf of the putative class. An amended complaint was filed on September 28, 2015. MobileIron filed a motion to
dismiss the amended complaint on November 13, 2015, which was granted on February 22, 2016, with leave to amend .
On August 5, 2015, August 21, 2015 and August 24, 2015, purported stockholder class action lawsuits were filed in the
Superior Court of California, Santa Clara County against the Company, certain of its officers, directors, underwriters and
investors, captioned Schneider v. MobileIron, Inc., et al., Kerley v. MobileIron, Inc., et al. and Steinberg v. MobileIron, Inc., et al.
The actions are purportedly brought on behalf of a putative class of all persons who purchased the Company’s securities issued
pursuant or traceable to the Company’s registration statement and the June 12, 2014 initial public offering. The lawsuits assert
claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. The complaints seek among other things,
compensatory damages and attorney’s fees and costs on behalf of the putative class. On January 4, 2016, the three class action
lawsuits were consolidated under the caption, In re MobileIron, Inc. Shareholder Litigation . The Company intends to defend
these lawsuits vigorously.
The Company intends to defend the litigations vigorously.
We continually evaluate uncertainties associated with litigation and record a charge equal to at least the minimum
estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to
issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial
statements and (ii) the loss or range of loss can be reasonably estimated. If we determine that a loss is possible and a range of the
loss can be reasonably estimated, we disclose the range of the possible loss in the Notes to the Consolidated Financial Statements.
We evaluate, on a quarterly basis, developments in our legal matters that could affect the amount of liability that has been
previously accrued, if any, and the matters and related ranges of possible losses disclosed, and make adjustments and changes to
our disclosures as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated
amount of a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss, and such
amounts could be material. An estimate of a reasonably possible loss (or a range of loss) cannot be made in our lawsuits at this
time.
Indemnification
Under the indemnification provisions of our standard sales related contracts, we agree to defend and/or settle claims
brought by third parties against our customers alleging that the customer’s use of our software infringes the third party’s
intellectual property right, such as a patent right. These indemnification obligations are typically not subject to limitation;
however if it is commercially impractical for us to either procure the right for the customer to continue to use our software or
modify our software so that it’s not infringing, we typically can terminate the customer agreement and refund the customer a
portion of the license fees paid, prorated over the three year period from initial delivery. We also on occasion indemnify our
customers for other types of third party claims. In addition, we indemnify our officers, directors, and certain key employees while
they are serving in good faith in such capacities. Through December 31, 2015, we have not received any written claim under any
indemnification provision.
14.
Segment
Information
We conduct business globally. Our chief operating decision maker (Chief Executive Officer) reviews financial
information presented on a consolidated basis accompanied by information about revenue by geographic region for purposes of
allocating resources and evaluating financial performance. We have one business activity, and there are no segment managers
who are held accountable for operations, operating results and plans for levels, components or types of products or services below
the consolidated unit level. Accordingly, we are considered to be in a single reportable segment and operating unit structure.
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Revenue by geographic region based on the billing address was as follows:
(in thousands)
Revenue
United States
International
Total
Year
ended
December
31,
2014
2013
2015
$
74,235 $
75,063
58,656
46,918
$ 149,298 $ 132,295 $ 105,574
72,124 $
60,171
Substantially all of our long-lived assets were attributable to operations in the United States as of December 31, 2015
and 2014.
15.
Net
Loss
per
Share
The following table sets forth the computation of basic and diluted net loss per share for 2015, 2014 and 2013 (in
thousands, except per share data):
Numerator:
Net loss
Denominator:
Weighted–average shares outstanding
Less: weighted average shares subject to repurchase
Weighted–average shares used to compute basic and diluted net
loss per share
Basic and diluted net loss per share
Year
ended
December
31,
2015
2014
2013
$
(84,482) $ (61,889) $ (32,497)
78,867
(112)
48,332
(815)
13,009
(3,056)
78,755
47,517
$
(1.07) $
(1.30) $
9,953
(3.27)
Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares
outstanding for the period. Because we have reported a net loss for 2015, 2014 and 2013, the number of shares used to calculate
diluted net loss per common share is the same as the number of shares used to calculate basic net loss per common share for those
periods presented because the potentially dilutive shares would have been anti-dilutive if included in the calculation.
The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-
average shares outstanding because such securities have an antidilutive impact due to losses reported (in common stock
equivalent shares):
Convertible preferred stock
Options to purchase common stock, unvested restricted
stock and restricted stock units
Total
16
.
Income
Taxes
2015
As
of
December
31,
2014
2013
—
— 49,446,072
19,344,137 17,125,349 15,714,762
19,344,137 17,125,349 65,160,834
Loss before income taxes consists of the following (in thousands):
United States
International
Total
Year
ended
December
31,
2015
(84,595) $
965
(83,630) $
2014
(61,733) $
361
(61,372) $
$
$
2013
(32,529)
284
(32,245)
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A significant portion of our international income is earned by foreign branches of our United States parent corporation
and thus is already subject to United States taxation. The income of our foreign branches has been included as part of the United
States jurisdiction in the table above.
Income tax expense for 201 5, 2014 and 201 3 , was composed of the following (in thousands):
Year
ended
December
31,
2015 2014
2013
Current:
Federal
State
Foreign
Total current income tax expense
$ — $ — $ —
11
241
252
25
492
517
26
826
852
For 201 5 , 201 4 and 201 3 , our effective tax rate differs from the amount computed by applying the statutory federal
and state income tax rates to net loss before income tax, primarily as the result of changes in valuation allowance.
Federal tax benefit at statutory rate
State tax benefit net of federal effect
Foreign taxes
Change in valuation allowance
Credits
Stock-based compensation
Non-deductible expenses and other
Effective tax rate
Year
ended
December
31,
2014
34.0 %
2.8
(0.3)
(35.0)
1.9
(3.5)
(0.7)
(0.8) %
2015
34.0 %
2.2
(0.4)
(33.9)
1.5
(4.1)
(0.4)
(1.1)%
2013
34.0 %
1.1
(0.6)
(36.3)
6.1
(4.5)
(0.7)
(0.9)%
Income tax expense for 201 5 and 201 4 rela tes to state minimum income tax, income tax on our earnings in foreign
jurisdictions , and, in 2015, withholding taxes on sales to customers in certain jurisdictions . A significant portion of our
international income is earned by foreign branches of our United States parent corporation and thus is already subject to United
States taxation. The income of our foreign branches has been included as part of the United States jurisdiction in the table above.
The components of net deferred tax assets at December 31, 201 5 and 201 4 consisted of the following (in thousands):
Deferred tax assets:
Accruals and allowances
Gains on foreign exchange
Net operating loss carryforwards
Depreciation and amortization
R&D tax credits
Stock-based compensation
Valuation allowance
Net deferred tax assets
$
As
of
December
31,
2015
2014
6,489 $
127
64,674
7,413
7,969
9,278
(95,950)
—
4,720
77
43,553
8,329
5,707
5,235
(67,621)
—
Our accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of our net
deferred tax assets. We primarily considered such factors as our history of operating losses, the nature of our deferred tax assets
and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences
and carryforwards become deductible. At present, we do not believe that it is more likely than not that the deferred tax assets will
be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying
consolidated balance sheets.
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As of December 31, 201 5 , we had net operating loss carryforwards of approximately $194.7 million and $65.7 million
available to reduce future taxable income, if any, for both federal and state income tax purposes, respectively. The federal and
state net operating loss carryforwards will expire at various dates beginning 2027 and 2017, respectively.
We had federal and California R&D tax credit carryforwards at December 31, 201 5 of $6.5 million and $7.1 million,
respectively. If not utilized, the federal R&D tax credit carryforward will expire in various portions beginning 2027. The
California R&D tax credit can be carried forward indefinitely.
A limitation may apply to the use of the net operation loss and credit carryforwards, under provisions of the Internal
Revenue Code that are applicable if we experience an “ownership change”. That may occur, for example, as a result of trading in
our stock by significant investors as well as issuance of new equity. Should these limitations apply, the carryforwards would be
subject to an annual limitation, resulting in a substantial reduction in the gross deferred tax assets before considering the valuation
allowance. Further, a portion of the carryforwards may expire before being applied to reduce future earnings.
As a result of certain realization requirements of ASC 718, the table of deferred tax assets and liabilities shown above
does not include certain deferred tax assets as of December 31, 201 5 and 201 4 that arose directly from tax deductions related to
equity compensation in excess of compensation recognized for financial reporting. Equity will be increased by $5.1 million if and
when such deferred tax assets are ultimately realized. We use ASC 740 ordering when determining when excess tax benefits have
been realized.
We follow the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a
comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of uncertain tax
positions that have been taken or expected to be taken on a tax return. No non-current liability related to uncertain tax positions is
recorded in the financial statements as the deferred tax assets have been presented net of these unrecognized tax benefits. At
December 31, 201 5 and 201 4 , our reserve for unrecognized tax benefits was approximately $ 4.1 million and $2.8 million,
respectively . Due to the full valuation allowance at December 31, 201 5 , current adjustments to the unrecognized tax benefit will
have no impact on our effective income tax rate; any adjustments made after the valuation allowance is released will have an
impact on the tax rate. We do not anticipate any significant change in our uncertain tax positions within 12 months of this
reporting date. We include penalties and interest expense related to income taxes as a component of other expense and interest
expense, respectively, as necessary.
A reconciliation of the gross unrealized tax benefits is as follows (in thousands):
Unrecognized tax benefits, beginning of year
Gross increases—tax positions from prior periods
Gross increases—tax positions from current period
Unrecognized tax benefits, end of year
2013
Year
ended
December
31,
2014
$ 1,674
10
1,110
$ 2,794
548
98
1,028
$ 1,674
—
$
2015
$ 2,794
1,258
$ 4,052
We are subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 201 5 ,
the statute of limitations is open for all tax years from inception, that is, for the period from July 23, 2007 (date of inception) to
December 31, 201 5 and forward for federal, state and foreign tax purposes.
Item
9
.
Changes
in
and
Disagreements
with
Accountants
on
Accounting
and
Financial
Disclosure
None.
Item
9
A.
Controls
and
Procedures
Limitations
on
Effectiveness
of
Controls
In designing and evaluating the disclosure controls and procedures, management recognizes that any 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
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resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and
procedures relative to their costs.
Evaluation
of
Disclosure
Controls
and
Procedures
Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the
effectiveness of our disclosure controls and procedures as of December 31, 2015. The term “disclosure controls and procedures,”
as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other
procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the
SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to
provide a reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under
the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31,
2015, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to
disclose in reports that we file or submit under the Exchange Act were (i) recorded, processed, summarized, and reported within
the time periods specified in Securities and Exchange Commission rules and forms, and (ii) accumulated and reported to our
management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required
disclosure.
Management’s
Report
on
Internal
Controls
Our management is responsible for establishing and maintaining effective internal control over financial reporting as
defined in Rule 13a-15(f) under the Exchange Act. Our internal controls over financial reporting are designed to provide
reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of
published financial statements in accordance with the GAAP, including those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of the
Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with authorizations
of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.
Our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over
financial reporting as of December 31, 2015 based on the criteria established in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO framework).
Based on our assessment, we concluded that our internal control over financial reporting was effective as of December
31, 2015.
This Annual Report on Form 10-K does not include an audit or attestation report from our registered public accounting
firm regarding our internal control over financial reporting. Our management’s report was not subject to audit or attestation by
our registered public accounting firm pursuant to rules of the SEC that permits us to provide only management’s report in this
annual report for so long as we remain an “emerging growth company” under the Jumpstart Our Business Startups Act.
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Changes
in
Internal
Control
over
Financial
Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation
required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2015 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item
9
B.
Other
Information
On February 22, 2016 , the Compensation Committee of the Board of Directors approved the following changes in
compensation for our Chief Financial Officer and certain named executive officers:
Simon Biddiscombe, our Chief Financial Officer, received an increase in base salary from $325,000 to $400,000,
effective as of March 1, 2016, and an RSU grant of 150,000 shares, which will vest quarterly over four years, subject to his
continued service. His target bonus for 2016 will be 45% of his base salary. He was also granted a fully vested RSU of 20,468
shares as a special incentive grant and will be eligible to receive an additional special incentive RSU grant in May 2016 with a
fair value of $70,000 if we achieve certain first quarter 2016 financial targets. The second special incentive RSU grant will vest in
two equal tranches, on May 20 and August 20, 2016.
Suresh Batchu, our Chief Technology Officer, received an increase in base salary from $325,000 to $335,000, effective
as of March 1, 2016, and an RSU grant of 80,000 shares, which will vest quarterly over four years, subject to his continued
service. His target bonus for 2016 will be 45% of his base salary. He was also granted a fully vested RSU of 17,544 shares as a
special incentive grant and will be eligible to receive an additional special incentive RSU grant in May 2016 with a fair value of
$60,000 if we achieve certain first quarter 2016 financial targets. The second special incentive RSU grant will vest in two equal
tranches, on May 20 and August 20, 2016.
Vittorio Viarengo, our VP of Marketing, who was a named executive officer during the 2015 fiscal year, received an
increase in base salary from $295,000 to $310,000, effective as of March 1, 2016, and an RSU grant of 80,000 shares, which will
vest quarterly over four years, su bject to his continued service. His target bonus for 2016 will be 45% of his base salary. He was
also granted a fully vested RSU of 16,082 shares as a special incentive grant and will be eligible to receive an additional special
incentive RSU grant in May 2016 with a fair value of $55,000 if we achieve certain first quarter 2016 financial targets. The
second special incentive RSU grant will vest in two equal tranches, on May 20 and August 20, 2016.
The equity awards for Messrs. Biddiscombe, Batchu and Viarengo were approved pursuant to and in accordance with
the terms and conditions of the Company’s 2014 Equity Incentive Plan, the current form of Option Agreement and the Restricted
Stock Unit Award Agreement, as previously filed with the Securities and Exchange Commission, or SEC.
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PART
II
I
Certain information required by Part III is omitted from this Annual Report on Form 10-K since we intend to file our
definitive proxy statement for our 2016 annual meeting of stockholders, or the Definitive Proxy Statement, pursuant to Regulation
14A of the Securities Exchange Act of 1934, as amended, not later than 120 days after December 31, 2015, and certain
information to be included in the Definitive Proxy Statement is incorporated herein by reference
Item
10
.
Directors,
Executive
Officers
and
Corporate
Governance
Executive
Officers
and
Directors
Information responsive to this I tem with respect to executive officers and directors i s incorporated herein by reference
to the information from our 2016 P roxy S tatement under the sections titled “Executive Officers,” “Election of Directors,”
“Section 16(a) Beneficial Ownership Reporting Compliance” and “Information Regarding the Board of Directors and Corporate
Governance.”
Code
of
Conduct
As part of our system of corporate governance, our board of directors has adopted a code of business conduct and ethics.
The code applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions), agents and representatives, including our independent
directors and consultants, who are not employees of ours, with regard to their MobileIron-related activities. Our code of business
conduct and ethics is available on our website at www.mobileiron.com . We will post on this section of our website any
amendment to our code of business conduct and ethics, as well as any waivers of our code of business conduct and ethics, that are
required to be disclosed by the rules of the SEC or the NASDAQ Stock Market.
Item
11
.
Executive
Compensation
Information responsive to this I tem with respect to executive compensation is incorporated herein by reference to the
information from our 2016 Proxy Statement under the section titled “Executive Compensation” “Director Compensation”
“Compensation Committee” and “Compensation Committee Report.”
Item
12
.
Security
Ownership
of
Certain
Beneficial
Owners
and
Management
and
Related
Stockholder
Matters
Inform ation responsive to this Item with respect to security ownership of certain beneficial owners and management is
incorporated herein by reference to the information from our 2016 Proxy Statement under the section titled “Security Ownership
of Certain Beneficial Owners and Management.” Information regarding our stockholder approved and non-approved equity
compensation plans are incorporated by reference to the section entitled “Securities Authorized for Issuance Under Equity
Compensation Plans.”
Item
13
.
Certain
Relationships
and
Related
Transactions,
and
Director
Independence
Information responsive to this item with respect to certain relationships and related transactions, and director
independence is incorporated herein by reference to the information from our 2016 Proxy Statement under the section titled
“Certain Related-Person Transactions” and “Independence of the Board of Directors.”
Item
14.
Principal
Accountant
Fees
and
Services
Information responsive to this item with respect to principal accountant fees and services is incorporated herein by
reference to the information from our 2016 Proxy Statement under the section titled “Principal Accountant Fees and Services.”
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PART
I
V
Item
15
.
Exhibits
and
Financial
Statement
Schedules
Documents filed as part of this report are as follows:
1. Consolidated Financial Statements:
Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” Under Part II, Item 8
of this report.
2.
Financial Statement Schedules:
Financial statement schedules have been omitted because they are not applicable or the required information is shown in the
Consolidated Financial Statements or Notes to Consolidated Financial Statements included in Part II, Item 8 “Financial
Statements and Supplementary Data” of this report .
3. Exhibits:
The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each
case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
102
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURE S
MOBILEIRON, INC.
By: /s/ Barry Mainz
Barry Mainz
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Simon Biddiscombe
Simon Biddiscombe
Chief Financial Officer
(Principal Financial Officer and Accounting Officer)
Dated: February 23, 2016
The undersigned directors and officers of MobileIron, Inc. (the “Company”), a Delaware corporation, hereby constitute
and appoint Barry Mainz and Simon Biddiscombe , and each of them with full power to act without the other, the undersigned’s
true and lawful attorney-in-fact, with full power of substitution and re-substitution, for the undersigned and in the undersigned’s
name, place and stead in the undersigned’s capacity as an officer and/or director of the Company, to execute in the name and on
behalf of the undersigned this Report and to file such Report, with exhibits thereto and other documents in connection therewith
and any and all amendments thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each
of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done and to take
any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required of, the undersigned, it being understood that the documents executed by such
attorney-in-fact on behalf of the undersigned pursuant to this Power of Attorney shall be in such form and shall contain such
terms and conditions as such attorney-in-fact may approve in such attorney-in-fact’s discretion.
103
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below (and the above
Powers of Attorney granted) by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Barry Mainz
Barry Mainz
/s/ Simon Biddiscombe
Simon Biddiscombe
Chairman, President and Chief Executive Officer (Principal
Executive Officer)
Chief Financial Officer (Principal Financial Officer and
Accounting Officer)
/s/ Gaurav Garg
Gaurav Garg
/s/ Aaref Hilaly
Aaref Hilaly
Director
Director
/s/ Mat t hew Howard
Ma t thew Howard
Director
/s/ Frank Marshall
Frank Marshall
Director
/s/ Tae Hea Nahm
Tae Hea Nahm
Director
/s/ James Tolonen
James Tolonen
Director
/s/ Robert Tinker
Robert Tinker
Director
104
February 23, 2016
February 23, 2016
February 23, 2016
February 23, 2016
February 23, 2016
February 23, 2016
February 23, 2016
February 23, 2016
February 23, 2016
Table of Contents
Exhibit
Number
3.1
3.2
4.1
4.2
10.1
(1)
10.2
(1)
10.3
(1)
10.4
(1)
10.5†
Description
Amended and Restated
Certificate of
Incorporation of
MobileIron, Inc.
Amended and Restated
Bylaws of MobileIron,
Inc.
Reference is made to
Exhibits 3.1 and 3.2
above
Amended and Restated
Investors’ Rights
Agreement, dated
August 29, 2013
MobileIron, Inc. 2014
Equity Incentive Plan
Form of Option
Agreement and Option
Grant Notice for
MobileIron, Inc. 2008
Stock Plan
Current Form of Option
Agreement, Option
Grant Notice, Notice of
Option Exercise,
Restricted Stock Unit
Grant Notice and
Restricted Stock Unit
Award Agreement for
MobileIron, Inc. 2014
Equity Incentive Plan.
MobileIron, Inc. 2014
Employee Stock
Purchase Plan
Resale Agreement
between MobileIron,
Inc. and AT&T
Services, Inc., dated
April 22, 2010, as
amended and
supplemented
EXHIBIT INDEX .
Incorporated by Reference
Exhibit
Number
3.1
Filing
8-K
Filing
Date
June 17, 2014
File No.
001-36471
Filed
Herewith
3.4
S-1/A
May 29, 2014
333-195089
4.2
S-1
April 7, 2014
333-195089
10.3
10.4
S-/A1
S-1/A
May 29, 2014
333-195089
May 29, 2014
333-195089
10.1
10-Q
October 31, 2014
001-36471
10.5
S-1/A
June 9, 2014
333-195089
10.17
S-1/A
May 7, 2014
333-195089
105
Table of Contents
10.6
10.7
10.8
10.9
10.10
10.11
(1)
10.12
(1)
10.13
(1)
First Amendment to
Lease Agreement, dated
April 18, 2014 between
the Registrant and
Renault & Handley
Middlefield Road Joint
Venture, as successor to
Renault & Handley
Employees Investment
Company
Lease Agreement, dated
June 25, 2014, between
MobileIron Inc. and
Handley-Tittle
Middlefield Joint
Venture
Lease Agreement, dated
April 14, 2011 between
MobileIron, Inc. and
each of its directors and
its executive officers
Lease Agreement
between the Registrant
and Silicon Valley CA-
I, LLC, dated April 30,
2012
Sublease Agreement
between the Registrant
and ADTRAN, Inc.,
dated September 12,
2013
Form of Indemnity
Agreement entered into
between MobileIron,
Inc. and each of its
directors and its
executive officers
Employment offer letter
between MobileIron,
Inc. and Robert B.
Tinker, dated December
20, 2007
Amendment to
Employment Offer
Letter between
MobileIron, Inc. and
Robert B. Tinker, dated
March 12, 2008
10.8
S-1/A
April 23, 2014
333-195089
10.8
10-Q
August 7, 2014
001-36471
10.7
S-1
April 27, 2014
333-195089
10.8
S-1
April 7, 2014
333-195089
10.9
S-1
April 7, 2014
333-195089
10.6
S-1
April 7, 2014
333-195089
10.10
S-1
April 7, 2014
333-195089
10.11
S-1
April 7, 2014
333-195089
106
Table of Contents
10.14
(1)
10.15
(1)
10.16
(1)
10.17
(1)
10.18
(1)
10.19
(1)
10.20
(1)
10.21
10.22
(1)
10.23
10.24
(1)
Second Amendment to
Employment Offer
Letter between
MobileIron, Inc. and
Robert B. Tinker, dated
March 12, 2008
Third Amendment to
Employment Offer
Letter between
MobileIron, Inc. and
Robert B. Tinker, dated
March 12, 2008
Employment Offer
Letter between
MobileIron, Inc. and
Todd Ford, dated
December 12, 2013, as
amended
Employment Offer
Letter between
MobileIron, Inc. and
John Donnelly, dated
December 8, 2009
MobileIron, Inc. 2015
Senior Vice President,
Sales Territory and
Quota Assignment Plan
MobileIron, Inc.
Severance Benefit Plan
and Participation Notice
At-Will Employment
Agreement between
MobileIron, Inc., and
Simon Biddiscombe,
dated April 30, 2015
Lease between
MobileIron, Inc., and
WTA Middlefield LLC,
dated May 14, 2015
At-Will Employment
Agreement between
MobileIron, Inc., and
Damian Artt, dated
September 14, 2015
MobileIron, Inc. 2015
Non- Executive Bonus
Plan, as amended
MobileIron, Inc. 2015
Executive Bonus Plan,
as amended
10.12
S-1
April 7, 2014
333-195089
10.13
S-1
April 7, 2014
333-195089
10.14
S-1
April 7, 2014
333-195089
10.15
S-1
April 7, 2014
333-195089
10.22
10-K
February 27, 2015
001-36471
10.4
10-Q
May 4, 2015
001-36471
10.1
8-K
May 12, 2015
001-36471
10.1
8-K
May 20, 2015
001-36471
10.4
10-Q
November 2, 2015
001-36471
10.5
10-Q
November 2, 2015
001-36471
10.6
10-Q
November 2, 2015
001-36471
107
Table of Contents
10.25
(1)
10.26
10.27
(1)
10.28
(1)
10.29
(1)
10.30
(1)
10.31
(1)
21.1
23.1
24.1
Amended and Restated
Non-Employee
Director Compensation
Policy
Second Amendment to
Lease, dated
November 9, 2015, by
and among the
Company and Renault
& Handley Middlefield
Road Joint Venture
Form of Stock Option
Grant Notice and
Option Agreement
under the MobileIron,
Inc. 2015 Inducement
Plan
Form of Restricted
Stock Unit Grant
Notice and Restricted
Stock Unit Award
Agreement under the
MobileIron, Inc. 2015
Inducement Plan
Executive Employment
Agreement effective
January 6, 2016,
between MobileIron,
Inc. and Barry Mainz
Amended and Restated
MobileIron, Inc. 2015
Inducement Plan
At-Will Employment
Agreement between
MobileIron, Inc., and
Daniel Fields , dated
December 29, 2015
Subsidiaries of
Registrant
Consent of Deloitte &
Touche LLP,
Independent Registered
Public Accounting
Firm
Power of Attorney
(contained in signature
page hereto)
10.7
10-Q
November 2, 2015
001-36471
10.1
8-K
November 12,
2015
001-36471
10.2
8-K
January 6, 2016
001-36471
10.3
8-K
January 6, 2016
001-36471
10.4
8-K
January 6, 2016
001-36471
X
X
X
X
X
108
Table of Contents
31.1
31.2
32.1
(2)
Certification of Principal
Executive Officer
pursuant to Section 302
of the Sarbanes-Oxley
Act of 2002
Certification of Principal
Financial Officer
pursuant to Section 302
of the Sarbanes-Oxley
Act of 2002
Certification of Chief
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
X
X
X
EX—101.INS XBRL Instance Document
EX—101.SCH XBRL Taxonomy Extension Schema
EX—101.CAL XBRL Taxonomy Extension Calculation Linkbase
EX—101.DEF XBRL Taxonomy Extension Definition Linkbase
EX—101.LAB XBRL Taxonomy Extension Label Linkbase
EX—101.PRE XBRL Taxonomy Extension Presentation Linkbase
†
(1)
(2)
Certain portions of this exhibit are subject to a confidential treatment order. Omitted portions have been filed separately with
the Securities and Exchange Commission.
Management contract or compensation plan or arrangement.
The certifications attached as Exhibit 32.1 accompany this Annual Report on Form 10- K pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
109
Exhibit
10.
30
MOBILEIRON,
INC.
AMENDED
AND
RESTATED
2015
INDUCEMENT
PLAN
ADOPTED
BY
THE
BOARD
OF
DIRECTORS:
DECEMBER
20
,
2015
AMENDED
AND
RESTATED
:
JANUARY
5,
201
6
TERMINATION
DATE:
DECEMBER
19
,
2025
1.
GENERAL.
(a)
Purpose.
Awards under the Plan are intended to provide (1) an inducement material for
certain individuals to enter into employment with the Company within the meaning of Rule 5635(c)(4) of
the NASDAQ Listing Rules, (2) incentives for such persons to exert maximum efforts for the success of
the Company and any Affiliate, and (3) a means by which such persons shall have an opportunity to share
in the financial success of the Company.
(b)
Eligible
Award
Recipients.
Only Employees who satisfy the standards for inducement
grants under Rule 5635(c)(4) of the NASDAQ Listing Rules may be granted Awards under the Plan. A
person who previously served as an Employee or Director of the Company shall not be eligible to receive
Awards under the Plan, other than following a bona fide period of non-employment.
(c)
Available
Awards.
The Plan provides for the grant of the following Awards: (i) Options,
(ii) Stock Appreciation Rights (iii ) Restricted Stock Awards, ( i v) R estricted Stock Unit Awards, (v)
Performance Stock Awards, (vi ) P erformance Cash Awards, and (vi i) Other Stock Awards. All
Options shall be designated as Nonstatutory Stock Options.
2.
ADMINISTRATION.
(a)
Administration
by
Board.
The Board will administer the Plan. The Board may delegate
administration of the Plan to a Committee or Committees, as provided in Section 2(c), provided that the
grant of Awards shall be approved by the Company's independent compensation committee or a majority
of the Company's independent directors (as defined in Rule 5605(a)(2) of the NASDAQ Listing Rules) in
order to comply with the exemption from the stockholder approval requirement for “inducement grants”
provided under Rule 5635(c)(4) of the NASDAQ Listing Rules.
(b)
Powers
of
Board.
The Board will have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i)
To determine: (A) who will be granted Awards; (B) when and how each Award
will be granted; (C) what type of Award will be granted; (D) the provisions of each Award (which need
not be identical), including when a person will be permitted to exercise or otherwise receive cash or
Common Stock under the Award; (E) the number of shares of Common Stock subject to, or the cash
value of, an Award; and (F) the Fair Market Value applicable to a Stock Award.
(ii)
To construe and interpret the Plan and Awards granted under it, and to establish,
amend and revoke rules and regulations for administration of the Plan and Awards. The Board, in the
1 .
exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award
Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it will
deem necessary or expedient to make the Plan or Award fully effective.
(iii)
To settle all controversies regarding the Plan and Awards granted under it.
(iv)
To accelerate, in whole or in part, the time at which an Award may be exercised
or vest (or the time at which cash or shares of Common Stock may be issued in settlement thereof ).
(v)
To suspend or terminate the Plan at any time. Except as otherwise provided in the
Plan or an Award Agreement, suspension or termination of the Plan will not materially impair a
Participant’s rights under the Participant’s then-outstanding Award without the Participant’s written
consent , except as provided in subsection (viii) below .
(vi)
To amend the Plan in any respect the Board deems necessary or advisable, in
cluding, without limitation,
by adopting amendments relating to certain nonqualified deferred
compensation under Section 409A of the Code and/or ensuring that the Plan or Awards granted under the
Plan are exempt from , or compliant with , the requirements for nonqualified deferred compensation
under Section 409A of the Code , subject to the limitations, if any, of applicable law. If required by
applicable law or listing requirements, and except as provided in Section 9(a) relating to Capitalization
Adjustments, the Company will seek stockholder approval of any amendment of the Plan that (A)
materially increases the number of shares of Common Stock available for issuance under the Plan, (B)
materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially
increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which
shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of
the Plan, or (F) materially expands the types of Awards available for issuance under the Plan , but only
to the extent required by law or applicable listing standards . Except as otherwise provided in the Plan or
an Award Agreement, no amendment of the Plan will materially impair a Participant’s rights under an
outstanding Award without the Participant’s written consent.
(vii)
To approve forms of Award Agreements for use under the Plan and to amend the
terms of any one or more Awards, including, but not limited to, amendments to provide terms more
favorable to the Participant than previously provided in the Award Agreement, subject to any specified
limits in the Plan that are not subject to Board discretion; provided , however, that a Participant’s rights
under any Award will not be impaired b y any such amendment unless (A) the Company requests the
consent of th e affected Participant, and (B) such Participant consents in writing. Notwithstanding the
foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if
the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially
impair the Participant’s rights, and (2) subject to the limitations of applicable law, if any, the Board may
amend the terms of any one or more Awards without the aff ected Participant’s consent (A) to to clarify
the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code or
(B ) to comply with other applicable laws or listing requirements.
(viii)
Generally, to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company and that are not in conflict with the
provisions of the Plan or Awards.
2 .
(ix)
To adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees who are foreign nationals or employed outside the United States
(provided that Board approval will not be necessary for immaterial modifications to the Plan or any
Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction) .
(x)
To effect, with the consent of any adversely affected Participant, (A) the reduction
of the exercise, purchase or strike price of any outstanding Stock Award; (B) the cancellation of any
outstanding Stock Award and the grant in substitution therefor of a new (1) Option or SAR,
(2) Restricted Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock Award, (5) cash and/or (6)
other valuable consideration determined by the Board, in its sole discretion, with any such substituted
award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock
Award and (y) granted under the Plan or another equity or compensatory plan of the Company ; or (C)
any other action that is treated as a repricing under generally accepted accounting principles.
(c)
Delegation
to
Committee.
(i)
The Board may delegate some or all of the administration of the Plan to a
Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will
have, in connection with the administration of the Plan, the powers theretofore possessed by the Board
that have been delegated to the Committee, including the power to delegate to a subcommittee of the
Committee any of the administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board will thereafter be to the Committee or subcommittee , as applicable ). Any
delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions
of the Plan, adopted from time to time by the Board or Committee (as applicable). The Board may retain
the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the
Board some or all of the powers previously delegated.
(ii)
Rule
16b-3
Compliance.
The Committee may consist solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3.
(d)
Effect
of
Board’s
Decision.
All determinations, interpretations and constructions made
by the Board in good faith will not be subject to review by any person and will be final, binding and
conclusive on all persons.
3.
SHARES
SUBJECT
TO
THE
PLAN.
(a)
Share
Reserve.
Subject to Section 9(a) relating to Capitalization Adjustments , the
aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards
after the E ffective Date shall not exceed 1, 970 ,000 shares (the “ Share
Reserve
”) . For clarity, the
Share Reserve in this Section 3(a) is a limitation on the number of shares of Common Stock that may be
issued pursuant to the Plan. Accordingly, this Section 3(a) does not limit the granting of Stock Award s
except as provided in Section 7(a) . Shares may be issued in connection with a merger or acquisition as
permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section
303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will not reduce
the number of shares available for issuance under the Plan.
3 .
(b)
Reversion
of
Shares
to
the
Share
Reserve.
If a Stock Award or any portion thereof (i)
expires or otherwise terminates without all of the shares covered by such Stock Award having been
issued or (ii) is settled in cash ( i.e. , the Participant receives cash rather than stock), such expiration,
termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock
that may be available for issuance under the Plan. If any shares of Common Stock issued pursuant to a
Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a
contingency or condition required to vest such shares in the Participant, then the shares that are forfeited
or repurchased will revert to and again become available for issuance under the Plan. Any shares
reacquired by the Company in satisfaction of tax withholding obligations on a Stock Award or as
consideration for the exercise or purchase price of a Stock Award will again become available for
issuance under the Plan.
(c)
Source
of
Shares.
The stock issuable under the Plan will be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the Company on the open
market or otherwise.
4.
ELIGIBILITY;
APPROVAL
REQUIREMENTS
.
(a)
Eligibility.
Awards may only be granted to persons who are Employees described in
Section 1(b) of this Plan , where the Award is an inducement material to the individual’s entering into
employment with the Company or an Affiliate within the meaning of Rule 5635(c)(4) of the NASDAQ
Listing Rules. For clarity, Awards may not be granted to (1) Consultants or Directors, for service in such
capacities, or (2) any individual who was previously an Employee or Director of the Company, other than
following a bona fide period of non-employment.
(b)
Approval
Requirements.
All Awards must be granted either by a majority of the
Company’s independent directors or by the Company’s compensation committee comprised of
independent directors within the meaning of Rule 5605(a)(2) of the NASDAQ Listing Rules.
5.
PROVISIONS
R
ELATING
TO
OPTIONS
AND
STOCK
APPRECIATION
RIGHTS.
Each Option or SAR will be in such form and will contain such terms and conditions as the Board
deems appropriate. All Options will be designated Nonstatutory Stock Options at the time of grant . The
provisions of separate Options or SARs need not be identical; provided, however , that each Award
Agreement will conform to (through incorporation of provisions hereof by reference in the applicable
Award Agreement or otherwise) the substance of each of the following provisions:
(a)
Term.
No Option or SAR will be exercisable after the expiration of ten years from the
date of its grant or such shorter period specified in the Award Agreement.
(b)
Exercise
Price.
T he exercise or strike price of each Option or SAR will be not less
than 100% of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the
Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or
strike price lower than 100% of the Fair Market Value of the Common Stock subject to the Award if such
Award is granted pursuant to an assumption of or substitution for another option or stock appreciation
right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A
of the Code. Each SAR will be denominated in shares of Common Stock equivalents.
4 .
(c)
Purchase
Price
for
Options.
The purchase price of Common Stock acquired pursuant to
the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the
Board in its sole discretion, by any combination of the methods of payment set forth below. The Board
will have the authority to grant Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the
Company to use a particular method of payment. The permitted methods of payment are as follows:
(i)
by cash, check, bank draft or money order payable to the Company;
(ii)
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the
receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;
(iii)
by delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;
(iv)
b y a “net exercise” arrangement pursuant to which the Company will reduce the
number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a
Fair Market Value that does not exceed the aggregate exercise price; provided, however , that the
Company will accept a cash or other payment from the Participant to the extent of any remaining balance
of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued. Shares of Common Stock will no longer be subject to an Option and will not be exercisable
thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant
to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C)
shares are withheld to satisf y tax withholding obligations; or
(v)
in any other form of legal consideration that may be acceptable to the Board and
specified in the applicable Award Agreement.
(d)
Exercise
and
Payment
of
a
SAR.
To exercise any outstanding SAR, the Participant
must provide written notice of exercise to the Company in compliance with the provisions of the Stock
Appreciation Right Agreement evidencing such SAR. The appreciation distribution payable on the
exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the SAR) of a number of shares of Common Stock equal to the
number of Common Stock equivalents in which the Participant is vested under such SAR, and with
respect to which the Participant is exercising the SAR on such date, over (B) the aggregate strike price of
the number of Common Stock equivalents with respect to which the Participant is exercising the SAR on
such date . The appreciation distribution may be paid in Common Stock, in cash, in any combination of
the two or in any other form of consideration, as determined by the Board and contained in the Award
Agreement evidencing such SAR.
(e)
Transferability
of
Options
and
SARs.
The Board may, in its sole discretion, impose
such limitations on the transferability of Options and SARs as the Board will determine. In the absence
of such a determination by the Board to the contrary, the following restrictions on the transferability of
Options and SARs will apply:
5 .
(i)
Restrictions
on
Transfer.
An Option or SAR will not be transferable except by
will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be
exercisable during the lifetime of the Participant only by the Participant. The Board may permit transfer
of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as
explicitly provided in the Plan, neither an Option nor a SAR may be transferred for consideration.
(ii)
Domestic
Relations
Orders.
Subject to the approval of the Board or a duly
authorized Officer, an Option or SAR may be transferred pursuant to the terms of a domestic relations
order , official marital settlement agreement or other divorce or separation instrument as permitted by
Treasury Regulations Section 1.421-1(b)(2) .
(iii)
Beneficiary
Designation.
Subject to the approval of the Board or a duly
authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved
by the Company (or the designated broker), designate a third party who, on the death of the Participant,
will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other
consideration resulting from such exercise. In the absence of such a designation, upon the death of the
Participant, the executor or administrator of the Participant’s estate will be entitled to exercise the Option
or SAR and receive the Common Stock or other consideration resulting from such exercise. However, the
Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the
Company that such designation would be inconsistent with the provisions of applicable laws.
(f)
Vesting
Generally.
The total number of shares of Common Stock subject to an Option
or SAR may vest and become exercisable in periodic installments that may or may not be equal. The
Option or SAR may be subject to such other terms and conditions on the time or times when it may or
may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as
the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary. The
provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum
number of shares of Common Stock as to which an Option or SAR may be exercised.
(g)
Termination
of
Continuous
Service.
Except as otherwise provided in the applicable
Award Agreement or other agreement between the Participant and the Company, if a Participant’s
Continuous Service terminates (other than for Cause and other than upon the Participant’s death or
Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was
entitled to exercise such Award as of the date of termination of Continuous Service) within the period of
time ending on the earlier of (i) the date which occurs ninety (90) days following the termination of the
Participant’s Continuous Service (or such longer or shorter period specified in the applicable Award
Agreement), and (ii) the expiration of the term of the Option or SAR as set forth in the Award
Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her
Option or SAR (as applicable) within the applicable time frame, the Option or SAR will terminate.
(h)
Extension
of
Termination
Date.
If the exercise of an Option or SAR following the
termination of the Participant’s Continuous Service (other than for Cause and other than upon the
Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of
Common Stock would violate the registration requirements under the Securities Act, then the Option or
SAR will terminate on the earlier of (i) the expiration of a total period of time (that need not
6 .
be consecutive) equal to the applicable post termination exercise period after the termination of the
Participant’s Continuous Service during which the exercise of the Option or SAR would not be in
violation of such registration requirements, and (ii) the expiration of the term of the Option or SAR as set
forth in the applicable Award Agreement. In addition, unless otherwise provided in a Participant’s
Award Agreement, if the sale of any Common Stock received on exercise of an Option or SAR following
the termination of the Participant’s Continuous Service (other than for Cause) would violate the
Company’s insider trading policy, then the Option or SAR will terminate on the earlier of (i) the
expiration of the period of days or months (that need not be consecutive) equal to the applicable post-
termination exercise period after the termination of the Participant’s Continuous Service during which the
sale of the Common Stock received upon exercise of the Option or SAR would not be in violation of the
Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in
the applicable Award Agreement.
(i)
Disability
of
Participant.
Except as otherwise provided in the applicable Award
Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous
Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her
Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the
date of termination of Continuous Service), but only within such period of time ending on the earlier of
(i) the date which occurs 12 months following such te rmination of Continuous Service (or such longer or
shorter period specified in the Award Agreement), and (ii) the expiration of the term of the Option or
SAR as set forth in the Award Agreement. If, after termination of Continuous Service, the Participant
does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as
applicable) will terminate.
(j)
Death
of
Participant.
Except as otherwise provided in the applicable Award
Agreement or other agreement between the Participant and the Company, if (i) a Participant’s Continuous
Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if
any) specified in the Award Agreement for exercisability after the termination of the Participant’s
Continuous Service for a reason other than death, then the Option or SAR may be exercised (to the extent
the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s
estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a
person designated to exercise the Option or SAR upon the Participant’s death, but only within the period
ending on the earlier of (i) the date which occurs 18 months following the date of death (or such longer or
shorter period specified in the Award Agreement), and (ii) the expiration of the term of such Option or
SAR as set forth in the Award Agreement. If, after the Participant’s death, the Option or SAR is not
exercised within the applicable time frame, the Option or SAR (as applicable) will terminate.
(k)
Termination
for
Cause.
Except as explicitly provided otherwise in a Participant’s
Award Agreement or other individual written agreement between the Company or any Affiliate and the
Participant , if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will
terminate immediately upon such Participant’s termination of Continuous Service , and the Participant
will be prohibited from exercising his or her Option or SAR from and after the date of such termination
of Continuous Service.
(l)
Non-Exempt
Employees
. If an Option or SAR is granted to an Employee who is a non-
exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR
will not be first exercisable for any shares of Common Stock until at least six months following
7 .
the date of grant of the Option or SAR (although the Award may vest prior to such date). Consistent with
the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers
a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued,
or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may
be defined in the Participant’s Award Agreement in another agreement between the Participant and the
Company, or, if no such definition, in accordance with the Company's then current employment policies
and guidelines), the vested portion of any Options and SARs may be exercised earlier than six months
following the date of grant. The foregoing provision is intended to operate so that any income derived by
a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt
from his or her regular rate of pay. To the extent permitted and/or required for compliance with the
Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in
connection with the exercise, vesting or issuance of any shares under any other Stock Award will be
exempt from the employee’s regular rate of pay, the provisions of this Section 5(l) will apply to all Stock
Awards and are hereby incorporated by reference into such Stock Award Agreements.
6.
PROVISIONS
OF
STOCK
AWARDS
OTHER
THAN
OPTIONS
AND
SARS.
(a)
Restricted
Stock
Awards.
Each Restricted Stock Award Agreement will be in such form
and will contain such terms and conditions as the Board will deem appropriate. To the extent consistent
with the Company’s bylaws, at the Board’s election, shares of Common Stock may be (x) held in book
entry form subject to the Company’s instructions until any restrictions relating to the Restr icted Stock
Award lapse; or (y) evidenced by a certificate, which certificate will be held in such form and manner as
determined by the Board. The terms and conditions of Restricted Stock Award Agreements may change
from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not
be identical. Each Restricted Stock Award Agreement will conform to (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of each of the following
provisions:
(i)
Consideration.
A Restricted Stock Award may be awarded in consideration for
(A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or
an Affiliate, or (C) any other form of legal consideration (including future services) that may be
acceptable to the Board, in its sole discretion, and permissible under applicable law.
(ii)
Vesting.
Shares of Common Stock awarded under the Restricted Stock Award
Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be
determined by the Board.
(iii)
Termination
of
Participant’s
Continuous
Service.
If
a Participant’s
Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase
right any or all of the shares of Common Stock held by the Participant that have not vested as of the date
of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.
(iv)
Transferability.
Rights to acquire shares of Common Stock under the Restricted
Stock Award Agreement will be transferable by the Participant only upon such terms and conditions as
are set forth in the Restricted Stock Award Agreement, as the Board will determine in
8 .
its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement
remains subject to the terms of the Restricted Stock Award Agreement.
(v)
Dividends.
A Restricted Stock Award Agreement may provide that any dividends
paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the
shares subject to the Restricted Stock Award to which they relate.
(b)
Restricted
Stock
Unit
Awards.
Each Restricted Stock Unit Award Agreement will be in
such form and will contain such terms and conditions as the Board will deem appropriate. The terms and
conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and
conditions of separate Restricted Stock Unit Award Agreements need not be identical. Each Restricted
Stock Unit Award Agreement will conform to (through incorporation of the provisions hereof by
reference in the Agreement or otherwise) the substance of each of the following provisions:
(i)
Consideration.
At the time of grant of a Restricted Stock Unit Award, the Board
will determine the consideration, if any, to be paid by the Participant upon delivery of each share of
Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the
Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any
form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible
under applicable law.
(ii)
Vesting.
At the time of the grant of a Restricted Stock Unit Award, the Board
may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in
its sole discretion, deems appropriate.
(iii)
Payment
. A Restricted Stock Unit Award may be settled by the delivery of
shares of Common Stock, their cash equivalent, any combination thereof or in any other form of
consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
(iv)
Additional
Restrictions.
At the time of the grant of a Restricted Stock Unit
Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the
delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit
Award to a time after the vesting of such Restricted Stock Unit Award.
(v)
Dividend
Equivalents.
Dividend equivalents may be credited in respect of shares
of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained
in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock
Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted
Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms
and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
(vi)
Termination
of
Participant’s
Continuous
Service.
as otherwise
provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock
Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
Except
9 .
(c)
Performance
Awards
.
(i)
Performance
Stock
Awards
. A Performance Stock Award is a Stock Award
that is payable (including that may be granted, may vest or may be exercised) contingent upon the
attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may
but need not require the Participant’s completion of a specified period of Continuous Service. The length
of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the
measure of whether and to what degree such Performance Goals have been attained will be conclusively
determined by the Committee (or the Board) , in its sole discretion. In addition, to the extent permitted
by applicable law and the applicable Award Agreement, the Board may determine that cash may be used
in payment of Performance Stock Awards.
(ii)
Performance
Cash
Awards
. A Performance Cash Award is a cash award that is
payable contingent upon the attainment during a Performance Period of certain Performance Goals. A
Performance Cash Award may also require the completion of a specified period of Continuous
Service. At the time of grant of a Performance Cash Award, the length of any Performance Period, the
Performance Goals to be achieved during the Performance Period, and the measure of whether and to
what degree such Performance Goals have been attained will be conclusively determined by the
Committee (or the Board), in its sole discretion. The Board may specify the form of payment of
Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have
the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to
be paid in whole or in part in cash or other property.
(iii)
Board
Discretion
. The Board retains the discretion to reduce or eliminate the
compensation or economic benefit due upon attainment of Performance Goals and to define the manner
of calculating the Performance Criteria it selects to use for a Performance Period. Partial achievement of
the specified criteria may result in the payment or vesting corresponding to the degree of achievement as
specified in the Stock Award Agreement or the written terms of a Performance Cash Award.
(d)
Other
Stock
Awards
. Other forms of Stock Awards valued in whole or in part by
reference to, or otherwise based on, Common Stock, including the appreciation in value thereof (e.g.,
options or stock rights with an exercise price or strike price less than 100% of the Fair Market Value of
the Common Stock at the time of grant) may be granted either alone or in addition to Stock Awards
provided for under Section 5 and the preceding provisions of this Section 6 . Subject to the provisions of
the Plan, the Board will have sole and complete authority to determine the persons to whom and the time
or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or
the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and
conditions of such Other Stock Awards.
7.
COVENANTS
OF
THE
COMPANY.
(a)
Availability
of
Shares.
The Company will keep available at all times the number of
shares of Common Stock reasonably required to satisfy then-outstanding Awards.
(b)
Securities
Law
Compliance.
The Company will seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock
Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;
10 .
provided, however , that this undertaking will not require the Company to register under the Securities
Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any
such regulatory commission or agency the authority that counsel for the Company deems necessary for
the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent
issuance of cash or Common Stock pursuant to the Award if such grant or issuance would be in violation
of any applicable securities law.
(c)
No
Obligation
to
Notify
or
Minimize
Taxes.
The Company will have no duty or
obligation to any Participant to advise such holder as to the time or manner of exercising such Stock
Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such
holder of a pending termination or expiration of an Award or a possible period in which the Award may
not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Award
to the holder of such Award.
8.
MISCELLANEOUS.
(a)
Use
of
Proceeds
from
Sales
of
Common
Stock.
Proceeds from the sale of shares of
Common Stock pursuant to Awards will constitute general funds of the Company.
(b)
Corporate
Action
Constituting
Grant
of
Awards.
Corporate action constituting a grant
by the Company of an Award to any Participant will be deemed completed as of the date of such
corporate action, unless otherwise determined by the Board, regardless of when the instrument,
certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the
Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes)
documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting
schedule or number of shares) that are inconsistent with those in the Award Agreement or related grant
documents as a result of a clerical error in the papering of the Award Agreement or related grant
documents , the corporate records will control and the Participant will have no legally binding right to the
incorrect term in the Award Agreement or related grant documents .
(c)
Stockholder
Rights.
No Participant will be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to an Award unless and until
(i) such Participant has satisfied all requirements for exercise of, or the issuance of shares of Common
Stock under, the Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to such
Award has been entered into the books and records of the Company.
(d)
No
Employment
or
Other
Service
Rights.
Nothing in the Plan, any Award
Agreement or any other instrument executed thereunder or in connection with any Award granted
pursuant thereto will confer upon any Participant any right to continue to serve the Company or an
Affiliate in the capacity in effect at the time the Award was granted or will affect the right of the
Company or an Affiliate to terminate the employment of an Employee with or without n otice and with or
without cause .
(e)
Change
in
Time
Commitment.
In the event a Participant’s regular level of time
commitment in the performance of his or her services for the Company and any Affiliates is reduced
11 .
(for example, and without limitation, if the Participant is an Employee of the Company and the Employee
has a change in status from a full-time Employee to a part-time Employee or takes an extended leave of
absence ) after the date of grant of any Award to the Participant, the Board has the right in its sole
discretion to (x) make a corresponding reduction in the number of shares or cash amount subject to any
portion of such Award that is scheduled to vest or become payable after the date of such change in time
commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment
schedule applicable to such Award. In the event of any such reduction, the Participant will have no right
with respect to any portion of the Award that is so reduced or extended .
(f)
Investment
Assurances.
The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Award, (i) to give written assurances satisfactory to the
Company as to the Participant’s knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that such Participant is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give
written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock
subject to the Award for the Participant’s own account and not with any present intention of selling or
otherwise distributing the Common Stock. The foregoing requirements, and any assurances given
pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or
acquisition of Common Stock under the Award has been registered under a then currently effective
registration statement under the Securities Act, or (B) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in
order to comply with applicable securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.
(g)
Withholding
Obligations.
Unless prohibited by the terms of an Award Agreement, the
Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating
to an Award by any of the following means or by a combination of such means: (i) causing the
Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of
Common Stock issued or otherwise issuable to the Participant in connection with the Award; provided,
however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of
the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from an Award
settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v)
by such other method as may be set forth in the Award Agreement.
(h)
Electronic
Delivery
. Any reference herein to a “written” agreement or document will
include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any
successor website thereto) or posted on the Company’s intranet (or other shared electronic medium
controlled by the Company to which the Participant has access) .
(i)
Deferrals.
To the extent permitted by applicable law, the Board, in its sole discretion,
may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or
settlement of all or a portion of any Award may be deferred and may establish programs and procedures
for deferral elections to be made by Participants. Deferrals by Participants will be made
12 .
in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board
may provide for distributions while a Participant is still an employee or otherwise providing services to
the Company. The Board is authorized to make deferrals of Awards and determine when, and in what
annual percentages, Participants may receive payments, including lump sum payments, following the
Participant’s termination of Continuous Service, and implement such other terms and conditions
consistent with the provisions of the Plan and in accordance with applicable law.
(j)
Compliance
with
Section
409A
of
the
Code
.
Unless otherwise expressly provided for
in an Award Agreement, the Plan and Award Agreements will be interpreted to the greatest extent
possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A
of the Code, and, to the extent not so exempt, in compliance with Section 409A of the Code. If the Board
determines that any Award granted hereunder is not exempt from and is therefore subject to Section 409A
of the Code, the Award Agreement evidencing such Award will incorporate the terms and conditions
necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an
Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by
reference into the Award Agreement . Notwithstanding anything to the contrary in this Plan (and unless
the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly
traded, and if a Participant holding an Award that constitutes “deferred compensation” under Section
409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or
payment of any amount that is due because of a “separation from service” (as defined in Section 409A of
the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is
six months following the date of such Participant’s “separation from service” (as defined in Section 409A
of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s
death, unless such distribution or payment can be made in a manner that complies with Section 409A of
the Code, and any amounts so deferred will be paid in a lump sum on the day after such six month period
elapses, with the balance paid thereafter on the original schedule.
(k)
Clawback/Recovery
. All Awards granted under the Plan will be subject to recoupment
in accordance with any clawback policy that the Company is required to adopt pursuant to the listing
standards of any national securities exchange or association on which the Company’s securities are listed
or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other
applicable law. In addition, the Board may impose such other clawback, recovery or recoupment
provisions in an Award Agreement as the Board determines necessary or appropriate, including but not
limited to a reacquisition right in respect of previously acquired shares of Common Stock or other cash or
property upon the occurrence of an event constituting Cause. No recovery of compensation under such
a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive
termination” (or similar term) under any agreement with the Company.
9.
ADJUSTMENTS
UPON
CHANGES
IN
COMMON
STOCK;
OTHER
CORPORATE
EVENTS.
(a)
Capitalization
Adjustments
. In the event of a Capitalization Adjustment, the Board
will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject
to the Plan pursuant to Section 3(a) and (ii) the class(es) and number of securities and price per share of
stock subject to outstanding Stock Awards. The Board will make such adjustments, and its determination
will be final, binding and conclusive.
13 .
(b)
Dissolution
or
Liquidation
. Except as otherwise provided in the Stock Award
Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards
(other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a
forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the
completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s
repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company
notwithstanding the fact that the holder of such Stock Award is providing Continuous Service; provided,
however , that the Board may, in its sole discretion, cause some or all Stock Awards to become fully
vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards
have not previously expired or terminated) before the dissolution or liquidation is completed but
contingent on its completion.
(c)
Corporate
Transaction.
The following provisions will apply to Stock Awards in the
event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock
Award or any other written agreement between the Company or any Affiliate and the Participant or
unless otherwise expressly provided by the Board at the time of grant of a Stock Award. In the event of a
Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board will take one or
more of the following actions with respect to Stock Awards, contingent upon the closing or completion of
the Corporate Transaction:
(i)
arrange for the surviving corporation or acquiring corporation (or the surviving or
acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar
stock award for the Stock Award (including, but not limited to, an award to acquire the same
consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);
(ii)
arrange for the assignment of any reacquisition or repurchase rights held by the
Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation
or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(iii)
accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable,
the time at which the Stock Award may be exercised) to a date prior to the effective time of such
Corporate Transaction as the Board determine s (or, if the Board does not determine such a date, to the
date that is five days prior to the effective date of the Corporate Transaction), with such Stock Award
terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;
(iv)
arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights
held by the Company with respect to the Stock Award;
(v)
cancel or arrange for the cancellation of the Stock Award, to the extent not vested
or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash
consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
(vi)
make a payment, in such form as may be determined by the Board equal to the
excess, if any, of (A) the value of the property the Participant would have received upon the exercise of
the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any
exercise price payable by such holder in connection with such exercise.
14 .
The Board need not take the same action or actions with respect to all Stock Awards or portions
thereof or with respect to all Participants. The Board may take different actions with respect to the
vested and unvested portions of a Stock Award.
(d)
Change
in
Control.
A Stock Award may be subject to additional acceleration of
vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award
Agreement for such Stock Award or as may be provided in any other written agreement between the
Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration
will occur.
10.
TERMINATION
OR
SUSPENSION
OF
THE
PLAN.
The Board may suspend or terminate the Plan at any time and n o Awards may be granted under
the Plan while the Plan is suspended or after it is terminated. The suspension or termination of the Plan
shall not impair rights and obligations under any Award granted while the Plan was in effect except with
the consent of the affected Participant.
11.
EFFECTIVE
DATE
OF
THE
PLAN
.
The Plan will become effective on the Effective Date.
12.
CHOICE
OF
LAW.
The law of the State of Delaware will govern all questions concerning the construction, validity
and interpretation of this Plan, without regard to that state’s conflict of laws rules.
13.
DEFINITIONS.
As used in the Plan, the following definitions will apply to the capitalized terms
indicated below:
(a)
“ Affiliate
” means, at the time of determination, any “parent” or “subsidiary” of the
Company as such terms are defined in Rule 405 of the Securities Act. The Board will have the authority
to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing
definition.
(b)
“ Award
” means a Stock Award or a Performance Cash Award.
(c)
“ Award
Agreement
” means a written agreement between the Company and a Participant
evidencing the terms and conditions of an Award.
(d)
“ Board
” means the Board of Directors of the Company.
(e)
“ Capital
Stock
” means each and every class of common stock of the Company,
regardless of the number of votes per share.
(f)
“ Capitalization
Adjustment
” means any change that is made in, or other events that
occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the
Adoption Date without the receipt of consideration by the Company through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash,
large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of
15 .
shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction,
as that term is used in Statement of Financial Accounting Standards Board Accounting Standards
Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any
convertible securities of the Company will not be treated as a Capitalization Adjustment.
(g)
“ Cause
”
will have the meaning ascribed to such term in any written agreement between
the Participant and the Company defining such term and, in the absence of such agreement, such term
means, with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s
commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of
the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in,
a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of
any contract or agreement between the Participant and the Company or of any statutory duty owed to the
Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential
information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a
termination of the Participant’s Continuous Service is either for Cause or without Cause will be made by
the Company, in its sole discretion. Any determination by the Company that the Continuous Service of a
Participant was terminated with or without Cause for the purposes of outstanding Awards held by such
Participant will have no effect upon any determination of the rights or obligations of the Company or
such Participant for any other purpose.
(h)
“ Change
in
Control
” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:
(i)
any Exchange Act Person becomes the Owner, directly or indirectly, of securities
of the Company representing more than 50% of the combined voting power of the Company’s then
outstanding securities other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the
acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of
securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that
acquires the Company’s securities in a transaction or series of related transactions the primary purpose of
which is to obtain financing for the Company through the issuance of equity securities, (C) on account of
the acquisition of securities of the Company by an y individual who was on the IPO Date, either an
executive officer or a Director (either, an “ IPO
Investor
”) and/or any entity in which an IPO Investor
has a direct or indirect interest (whether in the form of voting rights or participation in profits or capital
contributions) of more than 50% (collectively, the “ IPO
Entities
” ) or on account of the IPO Entities
continuing to hold shares that come to represent more than 50% of the combined voting power of the
Company’s then outstanding securities as a result of the conversion of any class of the Company’s
securities into another class of the Company’s securities having a different number of votes per share
pursuant to the conversion provisions set forth in the Company’s Amended and Restated Certificate of
Incorporation ; or (D) solely because the level of Ownership held by any Exchange Act Person (the “
Subject
Person
”) exceeds the designated percentage threshold of the outstanding voting securities as a
result of a repurchase or other acquisition of voting securities by the Company reducing the number of
shares outstanding, provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the
repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting
securities Owned by the Subject Person over the designated percentage threshold, then a Change in
Control will be deemed to occur;
16 .
(ii)
there is consummated a merger, consolidation or similar transaction involving
(directly or indirectly) the Company and, immediately after the consummation of such merger,
consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not
Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the
combined outstanding voting power of the surviving Entity in such merger, consolidation or similar
transaction or (B) more than 50% of the combined outstanding voting power of the parent of the
surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the
same proportions as their Ownership of the outstanding voting securities of the Company immediately
prior to such transaction; provided, however , that a merger, consolidation or similar transaction will not
constitute a Change in Control under this prong of the definition if the outstanding voting securities
representing more than 50% of the combined voting power of the surviving Entity or its parent are owned
by the IPO Entities;
(iii)
there is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease,
license or other disposition of all or substantially all of the consolidated assets of the Company and its
Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which
are Owned by stockholders of the Company in substantially the same proportions as their Ownership of
the outstanding voting securities of the Company immediately prior to such sale, lease, license or other
disposition ; provided, however , that a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries will not constitute a
Change in Control under this prong of the definition if the outstanding voting securities representing
more than 50% of the combined voting power of the acquiring Entity or its parent are owned by the IPO
Entities ; or
(iv)
individuals who, on the date the Plan is adopted by the Board, are members of the
Board (the “ Incumbent
Board
”) cease for any reason to constitute at least a majority of the members of
the Board; provided, however , that if the appointment or election (or nomination for election) of any new
Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member will, for purposes of this Plan, be considered as a member of
the Incumbent Board.
Notwithstanding the foregoing definition or any other provision of th e Plan, the term Change in
Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose
of changing the domicile of the Company and the definition of Change in Control (or any analogous
term) in an individual written agreement between the Company or any Affiliate and the Participant will
supersede the foregoing definition with respect to Awards subject to such agreement; provided, however ,
that if no definition of Change in Control or any analogous term is set forth in such an individual written
agreement, the foregoing definition will apply.
(i)
“ Code
” means the Internal Revenue Code of 1986, as amended, including any applicable
regulations and guidance thereunder.
(j)
“ Committee
” means a committee of one or more Directors to whom authority has been
delegated by the Board in accordance with Section 2(c) and which is comprised of a majority of
independent directors within the meaning of Rule 560 5 (a)(2) of the NASDAQ Listing Rules.
17 .
(k)
“ Common
Stock
” means the common stock of the Company, having one vote per share.
(l)
“ Company
” means Mobile Iron , Inc. , a Delaware corporation .
(m)
“ Consultant
” means any person, including an advisor, who is (i) engaged by the
Company or an Affiliate to render consulting or advisory services and is compensated for such services,
or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services.
Consultants are not eligible to receive Awards under this Plan with respect to their service in such
capacity.
(n)
“ Continuous
Service
” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in
the capacity in which the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant renders such service, provided
that there is no interruption or termination of the Participant’s service with the Company or an Affiliate,
will not terminate a P articipant’s Continuous Service ; provided, however , that if the Entity for which
a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, in its sole
discretion, such Participant’s Continuous Service will be considered to have terminated on the date such
Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive
officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will
be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive
officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the
Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be
treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided
in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or
policy applicable to the Participant, or as otherwise required by law.
(o)
“ Corporate
Transaction
” means the consummation , in a single transaction or in a series
of related transactions, of any one or more of the following events:
(i)
a sale
or other disposition of all or substantially all, as determined by the Board,
in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii)
a sale or other disposition of at least 9 0% of the outstanding securities of the
Company;
(iii)
a merger, consolidation or similar transaction following which the Company is
not the surviving corporation; or
(iv)
a merger, consolidation or similar transaction following which the Company is
the surviving corporation but the shares of Common Stock outstanding immediately preceding the
merger, consolidation or similar transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property, whether in the form of securities, cash or
otherwise.
(p)
“ Director
” means a member of the Board. Directors are not eligible to receive Awards
under this Plan with respect to their service in such capacity.
18 .
(q)
“ Disability
” means, with respect to a Participant, the inability of such Participant to
engage in any substantial gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or that has lasted or can be expected to last for a
continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the
Code, and will be determined by the Board on the basis of such medical evidence as the Board deems
warranted under the circumstances.
(r)
“ Effective
Date
” means the date this Plan is approved by the Board or a Committee .
(s)
“ Employee
” means any person employed by the Company or an Affiliate. However,
service solely as a Director, or payment of a fee for such services, will not cause a Director to be
considered an “Employee” for purposes of the Plan.
(t)
“ Entity
” means a corporation, partnership, limited liability company or other entity.
(u)
“ Exchange
Act
” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
(v)
“ Exchange
Act
Person
”
means any natural person, Entity or “group” (within the
meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not
include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the
Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter
temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity
Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions
as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the
meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner,
directly or indirectly, of securities of the Company representing more than 50% of the combined voting
power of the Company’s then outstanding securities.
(w)
“ Fair
Market
Value
” means, as of any date, the value of the Common Stock determined
as follows:
(i)
If the Common Stock is listed on any established stock exchange or traded on any
established market, the Fair Market Value of a share of Common Stock will be, unless otherwise
determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or
the exchange or market with the greatest volume of trading in the Common Stock) on the date of
determination, as reported in a source the Board deems reliable.
(ii)
Unless otherwise provided by the Board, if there is no closing sales price for the
Common Stock on the date of determination, then the Fair Market Value will be the closing selling price
on the last preceding date for which such quotation exists.
(iii)
In the absence of such markets for the Common Stock, the Fair Market Value will
be determined by the Board in good faith and in a manner that complies with Section 409A of the Code.
19 .
(x)
“ Incentive
Stock
Option
” means an option intended to be, and qualifies as, an “incentive
stock option” within the meaning of Section 422 of the Code. Incentive Stock Options are not
permissible Awards under the Plan.
(y)
“ IPO
Date
” means the date the underwriting agreement between the Company and the
underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common
Stock was priced for the initial public offering.
(z)
“ Non-Employee
Director
”
means a Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from
the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a
Director (except for an amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act (“ Regulation
S-K
”)), does not possess an
interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation
S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to
Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of
Rule 16b-3.
(aa)
“ Nonstatutory
Stock
Option
” means any O ption granted pursuant to Section 5 of the
Plan that is not intended to qualify as an Incentive Stock Option.
(bb)
“ Officer
” means a person who is an officer of the Compan y within the meaning of
Section 16 of the Exchange Act.
(cc)
“ Option
” means a Nonstatutory Stock Option to purchase shares of Common Stock
granted pursuant to the Plan. Incentive Stock Options are not eligible Awards under the Plan.
(dd)
“ Option
Agreement
” means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement will be
subject to the terms and conditions of the Plan.
(ee)
“ Optionholder
” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.
(ff)
“ Other
Stock
Award
” means an award based in whole or in part by reference to the
Common Stock which is granted pursuant to the terms and conditions of Section 6(d) .
(gg)
“ Other
Stock
Award
Agreement
”
means a written agreement between the Company
and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award
grant. Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan.
(hh)
“ Own,
”
“ Owned,
”
“ Owner,
”
“ Ownership
”
means a person or Entity will be
deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities
if such person or Entity, directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.
(ii)
“ Participant
” means a person to whom an Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.
20 .
(jj)
“ Performance
Cash
Award
” means an award of cash granted pursuant to the terms and
conditions of Section 6(c)(ii) .
(kk)
“ Performance
Criteria
” means the one or more criteria that the Board will select for
purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that
will be used to establish such Performance Goals may be based on any one of, or combination of, the
following as determined by the Board: (i) earnings (including earnings per share and net earnings); (ii)
earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and
amortization; (iv) earnings before interest, taxes, depreciation, amortization and legal settlements; (v)
earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense);
(vi) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense)
and stock-based compensation; (vii) earnings before interest, taxes, depreciation, amortization, legal
settlements, other income (expense), stock-based compensation and changes in deferred revenue; (viii)
total stockholder return; (ix) return on equity or average stockholder’s equity; (x) return on assets,
investment, or capital employed; (xi) stock price; (xii) margin (including gross margin); (xiii) income
(before or after taxes); (xiv) operating income; (xv) operating income after taxes; (xvi) pre-tax profit;
(xvii) operating cash flow; (xviii) sales or revenue targets; (xix) increases in revenue or product revenue;
(xx) expenses and cost reduction goals; (xxi) improvement in or attainment of working capital levels;
(xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash
flow per share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii) implementation or
completion of projects or processes; (xxix) user satisfaction; (xxx) stockholders’ equity; (xxxi) capital
expenditures; (xxxii) debt levels; (xxxiii) operating profit or net operating profit; (xxxiv) workforce
diversity; (xxxv) growth of net income or operating income; (xxxvi) billings; (xxxvii) bookings; (xxxviii)
the number of users, including but not limited to unique users ; (xxxix) employee retention; and (xxxx)
other m easures of performance selected by the Board.
(ll)
“ Performance
Goals
” means, for a Performance Period, the one or more goals
established by the Board for the Performance Period based upon the Performance Criteria. Performance
Goals may be based on a Company-wide basis, with respect to one or more business units, divisions,
Affiliates, or business segments, and in either absolute terms or relative to the perform ance of one or
more comparable companies or the performance of one or more
r elevant indices. In addition, the Board retains the discretion to reduce or eliminate the compensation or
economic benefit due upon attainment of Performance Goals and to define the manner of calculating the
Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified
criteria may result in the payment or vesting corresponding to the degree of achievement as specified in
the Stock Award Agreement or the written terms of a Performance Cash Award.
(mm)
“ Performance
Period
” means the period of time selected by the Board over which the
attainment of one or more Performance Goals will be measured for the purpose of determining a
Participant’s right to and the payment of a Stock Award or a Performance Cash Award. Performance
Periods may be of varying and overlapping duration, at the sole discretion of the Board.
(nn)
“ Performance
Stock
Award
” means a Stock Award granted under the terms and
conditions of Section 6(c)(i) .
(oo)
“ Plan
” means this Mobile Iron , Inc. 2015 Inducement Plan , as it may be amended .
21 .
(pp)
“ Restricted
Stock
Award
” means an award of shares of Common Stock which is granted
pursuant to the terms and conditions of Section 6(a) .
(qq)
“ Restricted
Stock
Award
Agreement
” means a written agreement between the Company
and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock
Award grant. Each Restricted Stock Award Agreement will be subject to the terms and conditions of the
Plan.
(rr)
“ Restricted
Stock
Unit
Award
”
means a right to receive shares of Common Stock
which is granted pursuant to the terms and conditions of Section 6(b) .
(ss)
“ Restricted
Stock
Unit
Award
Agreement
”
means a written agreement between the
Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a
Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement will be subject to the
terms and conditions of the Plan.
(tt)
“ Rule
16b-3
” means Rule 16b-3 promulgated under the Exchange Act or any successor
to Rule 16b-3, as in effect from time to time.
(uu)
“ Securities
Act
” means the Securities Act of 1933, as amended.
(vv)
“ Stock
Appreciation
Right
” or “ SAR
”
means a right to receive the appreciation on
Common Stock that is granted pursuant to the terms and conditions of Section 5 .
(ww)
“ Stock
Appreciation
Right
Agreement
” means a written agreement between the
Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock
Appreciation Right grant. Each Stock Appreciation Right Agreement will be subject to the terms and
conditions of the Plan.
(xx)
“ Stock
Award
” means any right to receive Common Stock granted under the Plan,
including a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a
Stock Appreciation Right, a Performance Stock Award or any Other Stock Award.
(yy)
“ Stock
Award
Agreement
” means a written agreement between the Company and a
Participant evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement
will be subject to the terms and conditions of the Plan.
(zz)
“ Subsidiary
” means, with respect to the Company, (i) any corporation of which more
than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of
such corporation will have or might have voting power by reason of the happening of any contingency) is
at the time, directly or indirectly, Owned by the Company, and (ii) any partnership , limited liability
company or other entity in which the Company has a direct or indirect interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50%.
22 .
Exhibit
10.31
December 28, 2015
Daniel Fields
Dear Danny,
On behalf of MobileIron, Inc. (the “ Company ”), I am pleased to offer you the full-time position of Senior Vice
President, Engineering and Chief Software Development Officer. Speaking for myself, as well as the other members of
the Company’s management team, we are all very impressed with your credentials and we look forward to your future
success in this position.
The terms of your new full-time position with the Company are as set forth below:
1. Position
.
a)
Your position will be Senior Vice President of Engineering and Chief Software Development Officer, a
“Section 16 Officer” position, working out of the Company’s headquarters office in Mountain View, CA. You
will report to the Chief Executive Officer.
b)
You agree to the best of your ability and experience that you will at all times loyally and conscientiously
perform all of the duties and obligations required of and from you pursuant to the express and implicit terms
hereof, and to the reasonable satisfaction of the Company. During the term of your employment, you further
agree that you will devote all of your business time and attention to the business of the Company, the
Company will be entitled to all of the benefits and profits arising from or incident to all such work services
and advice, you will not render commercial or professional services of any nature to any person or
organization, whether or not for compensation, without the prior written consent of the Company, and you
will not directly or indirectly engage or participate in any business that is competitive in any manner with the
business of the Company. Nothing in this letter agreement will prevent you from accepting speaking or
presentation engagements in exchange for honoraria or from serving on boards of charitable organizations, or
from owning no more than one percent (1%) of the outstanding equity securities of a corporation whose stock
is listed on a national stock exchange.
2. Start
Date
.
Subject to fulfillment of any conditions imposed by this letter agreement, you will commence this
new position with the Company on February 19, 2016.
3. Proof
of
Right
to
Work
.
For purposes of federal immigration law, you will be required to provide to the
Company documentary evidence of your identity and eligibility for employment in the United States. Such
documentation must be provided to us within three business days of your date of hire, or our employment relationship
with you may be terminated.
4. Compensation
.
a)
Base
Salary
:
You will be paid at the rate of $33,333 per month (which is equivalent to $400,000 on an
annualized basis), less payroll deductions and withholdings (the “ Base Salary ”), payable pursuant to the
Company’s regular payroll practices. The Base Salary will be reviewed annually as part of the Company’s
normal salary review process.
b)
Annual
Bonus
:
You will be eligible to participate in the Company’s 2016 executive bonus plan where
your target bonus is 45% of your base salary. Your actual bonus is guaranteed for the first year at 45%
($180,000) provided you are employed at the time the actual bonus is paid according to the Company’s 2016
executive bonus plan. For the purposes of clarity, over achievement is possible consistent with the terms of
the Company’s 2016 executive bonus plan.
c)
Signing
Bonus
:
Provided you accept this offer, the Company will pay you a one-time signing bonus in the
amount of $300,000, less deductions required by law (the “ Signing
Bonus
”). Fifty percent (50%) of this
Signing Bonus will be paid on the first regularly scheduled payroll date after your Start date, and then the
remaining 50% will be paid on the first regularly scheduled payroll date in June 2016, but in all cases not later
than June 15, 2016. Should the Company terminate your employment for Cause (as defined in the Executive
Severance Plan, See Attachment B) or should you choose to leave the Company for any reason, in either case
prior to one year anniversary of your Start Date, you will be eligible to keep the pro-rata share of the Signing
Bonus based on time served, and obligated to return to the Company the pro-rata portion of entire Signing
Bonus calculated based upon the difference between the termination date and your one year anniversary from
Start Date. Should the company terminate your employment without Cause (as defined in the Executive
Severance Plan, See Attachment B) you will not be required to return to the Company any portion of the
signing bonus.
5. Equity
.
a)
Restricted
Stock
Unit
Grant
.
Promptly following Executive’s commencement of employment, which
will be February 19, 2016 (the “ Start
Date
”), and as a material inducement to Executive’s employment by
the Company, the Compensation Committee of the Board will grant Executive (i) an award of 220,000
restricted stock units (the “ RSU
Award
”). The MobileIron RSUs will
vest ratably over four years as follows: (i) 25% of the total number of MobileIron RSUs will vest on the
Quarterly Vesting Date (see below) that is in the same calendar quarter as the one year anniversary of your
employment start date, and (ii) the remaining MobileIron RSUs will vest ratably with 6.25% of the total RSUs
vesting on each subsequent Quarterly Vesting Date, until the MobileIron RSUs are totally vested, subject to
your continued employment on each such Quarterly Vesting Date. The Quarterly Vesting Dates are February
20, May 20, August 20, and November 20 of each year. The grant will be subject to the terms of any
applicable equity plan of the Company and the MobileIron RSU Agreement between you and the Company.
b)
Regular
Option
Grant
.
Promptly following the Start Date and as a material inducement to the
Executive’s employment by the Company, the Compensation Committee of the Board will grant Executive an
option to purchase 150,000 shares of Common Stock of the Company with an exercise price equal to the fair
market value of a share of Common Stock on the date of grant (the “ Regular
Option
”). The Regular
Option will be subject to vesting as follows: 1/4
of the shares under the Regular Option will vest and
become exercisable on the first anniversary of the Start Date, and 1/48
of such shares will vest and become
exercisable at the end of each one-month period thereafter, subject to Executive’s continued service with the
Company. The grant will be subject to the terms of any applicable equity plan of the Company and the
MobileIron Option Agreement between you and the Company.
th
th
The equity compensation will be reviewed annually and you will be eligible for additional grants as part of the
Company’s normal annual equity review process.
6. Benefits
.
a)
Insurance
Benefits
.
The Company will provide you with the opportunity to participate in the standard
benefits plans currently available to other Company employees, subject to any eligibility requirements
imposed by such plans.
b)
Vacation;
Sick
Leave
.
You will be entitled to paid time off according to the Company’s standard policies.
7. Confidential
Information
and
Invention
Assignment
Agreement/
Employee
Handbook
.
Your acceptance
of this offer and commencement of employment with the Company is contingent upon your execution, and delivery to an
officer of the Company, of the Company’s Confidential Information and Invention Assignment Agreement, a copy of
which is enclosed for your review and execution (the “ Confidentiality Agreement ”), prior to or on your Start Date. As a
Company employee, you will be expected to abide by Company rules and policies, and acknowledge in writing that you
have read the Company’s Employee Handbook. By signing this offer letter, Candidate acknowledges receipt of the
current Employee Handbook.
8. At-Will
Employment
.
Executive’s employment relationship is at-will, and either Executive or the Company
may terminate the employment relationship at any time, with or without Cause or advance notice.
9. Termination
of
Employment;
Severance
and
Change
in
Control
Benefits
. You will be eligible to
participate in the MobileIron Executive Severance Benefit plan as outlined in Attachment B.
10. No
Conflicting
Obligations
.
You understand and agree that by accepting this offer of employment, you
represent to the Company that your performance will not breach any other agreement to which you are a party and that
you have not, and will not during the term of your employment with the Company, enter into any oral or written
agreement in conflict with any of the provisions of this letter or the Company’s policies. You are not to bring with you to
the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information
belonging to any former employer or other person or entity with respect to which you owe an obligation of
confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we
will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to
third parties. Also, we expect you to abide by any obligations to refrain from soliciting any person employed by or
otherwise associated with any former employer and suggest that you refrain from having any contact with such persons
until such time as any non-solicitation obligation expires.
11. Entire
Agreement
. This letter, together with the Confidentiality Agreement, sets forth the entire agreement
and understanding between you and the Company with respect to your employment and supersedes all prior agreements
and promises made to you by anyone, whether oral or written. This letter (and your employment at will status) may not
be modified or amended except by a written agreement, signed by an officer of the Company, although the Company
reserves the right to modify unilaterally your work location, compensation, benefits, job title and duties, and reporting
relationships. This letter will be governed by the laws of the State of California without regard to its conflict of laws
provision.
We are all delighted to be able to extend you this offer and look forward to working with you. To indicate your
acceptance of the Company’s offer, please sign and date this letter in the space provided below and return it to me, along
with a signed and dated copy of the Confidentiality Agreement. This offer will terminate if not accepted by you on or
before December 31, 2015 at 5pm pacific time.
Very Truly Yours,
Mobile
Iron,
Inc.
/s/ Jared Lucas
Signature
Jared Lucas, Chief People Officer
Printed Name and Title
December 28, 2015
Date
ACCEPTED
AND
AGREED:
/s/ Daniel Fields
Employee Signature
12/29/2015
Date
2/19/2016
Start Date
Attachment A:
CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT
As a condition of my becoming employed (or my employment being continued) by Mobile Iron, Inc., a Delaware
corporation (the “ Company ”), and in consideration of my employment relationship with the Company and my receipt of
the compensation now and hereafter paid to me by the Company, I agree to the following:
1. Employment
Relationship
.
I understand and acknowledge that this Agreement does not alter, amend or
expand upon (i) any rights I may have to continue in the employ of, or (ii) the duration of my employment relationship
with, the Company under any existing agreements between the Company and me or under applicable law. Any
employment relationship between the Company and me, whether commenced prior to or upon the date of this
Agreement, shall be referred to herein as the “ Relationship .”
2. At-Will
Relationship
.
I understand and acknowledge that the Relationship is and shall continue to be at-will,
meaning that either I or the Company may terminate the Relationship at any time and for any reason, with or without
cause or advance notice.
3. Confidential
Information
.
(a)
Company
Information
.
I agree at all times during the Relationship and thereafter, to hold in strictest
confidence, and not to use, except for the benefit of the Company to the extent necessary to perform my
obligations to the Company under the Relationship, or to disclose to any person, firm, corporation or other
entity without written authorization of the Board of Directors of the Company, any Confidential Information
of the Company which I obtain or create. I further agree not to make copies of such Confidential Information
except as authorized by the Company. I understand that “ Confidential Information ” means any Company
proprietary information, technical data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, suppliers, customer lists and customers (including, but not limited to,
customers of the Company on whom I called or with whom I became acquainted during the Relationship),
prices and costs, markets, software, developments, inventions, laboratory notebooks, processes, formulas,
technology, designs, drawings, engineering, hardware configuration information, marketing information,
licenses, financial information, budgets, information regarding the skills and compensation of the Company’s
employees, contractors, and any other service providers of the Company or other business information
disclosed to me by the Company either directly or indirectly in writing, orally or by drawings or observation
of parts or equipment or created by me during the Relationship, whether or not during working hours. I
understand that Confidential Information includes, but is not limited to, information pertaining to any aspect
of the Company’s business which is either information not known by actual or potential competitors of the
Company or other third parties not under confidentiality obligations to the Company, or is otherwise
proprietary information of the Company or its customers or suppliers, whether of a technical nature or
otherwise. I further understand that Confidential Information does not include any of the foregoing items
which has become publicly and widely
known and made generally available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(b)
Prior
Obligations
.
I represent that my performance of all terms of this Agreement as an employee of the
Company has not breached and will not breach any agreement with any former employer or other party,
including any agreement to keep in confidence proprietary information, knowledge or data acquired by me
prior or subsequent to the commencement of the Relationship, and I will not disclose to the Company or use
any inventions, confidential or non-public proprietary information or material belonging to any current or
former client or employer or any other party. I will not induce the Company to use any inventions,
confidential or non-public proprietary information, or material belonging to any current or former client or
employer or any other party.
(c)
Third
Party
Information
.
I recognize that the Company has received and in the future will receive
confidential or proprietary information from third parties subject to a duty on the Company’s part to maintain
the confidentiality of such information and to use it only for certain limited purposes. I agree to hold all such
confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the Company consistent with the
Company’s agreement with such third party.
4. Inventions
.
(a)
Inventions
Retained
and
Licensed
.
I have attached hereto, as Exhibit A , a list describing with
particularity all inventions, original works of authorship, developments, improvements, and trade secrets
which were made by me prior to the commencement of the Relationship (collectively referred to as “ Prior
Inventions ”), which belong solely to me or belong to me jointly with another, which relate in any way to any
of the Company’s proposed businesses, products or research and development, and which are not assigned to
the Company hereunder; or, if no such list is attached, I represent that there are no such Prior Inventions. If, in
the course of the Relationship, I incorporate into a Company product, process or machine a Prior Invention
owned by me or in which I have an interest, the Company is hereby granted and shall have a non- exclusive,
royalty-free, irrevocable, perpetual, worldwide license (with the right to sublicense) to make, have made,
copy, modify, make derivative works of, use, sell and otherwise distribute such Prior Invention as part of or in
connection with such product, process or machine.
(b)
Assignment
of
Inventions
.
I agree that I will promptly make full written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee,
all my right, title and interest throughout the world in and to any and all inventions, original works of
authorship, developments, concepts, know-how, improvements or trade secrets, whether or not patentable or
registrable under copyright or similar laws, which I may solely or jointly conceive or develop or reduce to
practice, or cause to be conceived or developed or reduced to practice, during the Relationship (collectively
referred to as “ Inventions ”), except as provided in Section 4(e) below. I further acknowledge that all
Inventions which are made by me (solely or jointly with others) within the scope of and during the
Relationship are “ works made for hire ” (to the greatest extent permitted by applicable law)
and are compensated by my salary, unless regulated otherwise by the mandatory law of the state of California.
Any assignment of Inventions (and all intellectual property rights with respect thereto) hereunder includes an
assignment of all moral rights. To the extent such moral rights cannot be assigned to the Company and to the
extent the following is allowed by the laws in any country where moral rights exist, I hereby unconditionally
and irrevocably waive the enforcement of such moral rights, and all claims and causes of action of any kind
against the Company or related to the Company’s customers, with respect to such rights. I further
acknowledge and agree that neither my successors-in-interest nor legal heirs retain any moral rights in any
Inventions (and any intellectual property rights with respect thereto).
(c)
Maintenance
of
Records
.
I agree to keep and maintain adequate and current written records of all
Inventions made by me (solely or jointly with others) during the Relationship. The records may be in the form
of notes, sketches, drawings, flow charts, electronic data or recordings, laboratory notebooks, and any other
format. The records will be available to and remain the sole property of the Company at all times. I agree not
to remove such records from the Company’s place of business except as expressly permitted by Company
policy which may, from time to time, be revised at the sole election of the Company for the purpose of
furthering the Company’s business. I agree to return all such records (including any copies thereof) to the
Company at the time of termination of the Relationship as provided for in Section 5.
(d)
Patent
and
Copyright
Rights
.
I agree to assist the Company, or its designee, at its expense, in every
proper way to secure the Company’s, or its designee’s, rights in the Inventions and any copyrights, patents,
trademarks, mask work rights, moral rights, or other intellectual property rights relating thereto in any and all
countries, including the disclosure to the Company or its designee of all pertinent information and data with
respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other
instruments which the Company or its designee shall deem necessary in order to apply for, obtain, maintain
and transfer such rights, or if not transferable, waive such rights, and in order to assign and convey to the
Company or its designee, and any successors, assigns and nominees the sole and exclusive rights, title and
interest in and to such Inventions, and any copyrights, patents, mask work rights or other intellectual property
rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my
power to do so, any such instrument or papers shall continue after the termination of this Agreement until the
expiration of the last such intellectual property right to expire in any country of the world. If the Company or
its designee is unable because of my mental or physical incapacity or unavailability or for any other reason to
secure my signature to apply for or to pursue any application for any United States or foreign patents,
copyright, mask works or other registrations covering Inventions or original works of authorship assigned to
the Company or its designee as above, then I hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to
execute and file any such applications and to do all other lawfully permitted acts to further the application for,
prosecution, issuance, maintenance or transfer of letters patent, copyright or other registrations thereon with
the same legal force and effect as if originally executed by me. I hereby waive and irrevocably quitclaim to
the Company or its designee any and all claims, of any nature whatsoever, which I now or hereafter have for
infringement of any and all proprietary rights assigned to the Company or such designee.
(e)
Exception
to
Assignments
.
I understand that the provisions of this Agreement requiring assignment of
Inventions to the Company do not apply to any invention which qualifies fully under the provisions of
California Labor Code Section 2870 (attached hereto as Exhibit B ). I will advise the Company promptly in
writing of any inventions that I believe meet such provisions and are not otherwise disclosed on Exhibit A .
(f)
Government
or
Third
Party
.
I agree that, as directed by the Company, I will assign to a third party,
including without limitation the United States, all my right, title, and interest in and to any particular
Company Invention.
5. Company
Property;
Returning
Company
Documents
.
I acknowledge and agree that I have no expectation
of privacy with respect to the Company’s telecommunications, networking or information processing systems (including,
without limitation, stored company files, e-mail messages and voice messages) and that my activity and any files or
messages on or using any of those systems may be monitored at any time without notice. I further agree that any property
situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets
or other work areas, is subject to inspection by Company personnel at any time with or without notice. I agree that, at the
time of termination of the Relationship, I will deliver to the Company (and will not keep in my possession, recreate or
deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, laboratory notebooks, materials, flow charts, equipment, other documents or property, or
reproductions of any of the aforementioned items developed by me pursuant to the Relationship or otherwise belonging
to the Company, its successors or assigns. In the event of the termination of the Relationship, I agree to sign and deliver
the “ Termination Certification ” attached hereto as Exhibit C ; however, my failure to sign and deliver the Termination
Certificate shall in no way diminish my continuing obligations under this Agreement.
6. Notification
to
Other
Parties
.
(a)
Employees
.
In the event that I leave the employ of the Company, I hereby consent to notification by the
Company to my new employer about my rights and obligations under this Agreement.
(b)
Consultants
.
I hereby grant consent to notification by the Company to any other parties besides the
Company with whom I maintain a consulting relationship, including parties with whom such relationship
commences after the effective date of this Agreement, about my rights and obligations under this Agreement.
7. Solicitation
of
Employees,
Consultants
and
Other
Parties
.
I agree that during the Relationship and for a
period of twenty-four (24) months immediately following the termination of the Relationship for any reason, whether
with or without cause, I shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s
employees or consultants to terminate their relationship with the Company, or attempt to solicit, induce, recruit,
encourage or take away employees or consultants of the Company, either for myself or for any other person or
entity. Further, during the Relationship and at any time following termination of the
Relationship for any reason, with or without cause, I shall not use any Confidential Information of the Company to
attempt to negatively influence any of the Company’s clients or customers from purchasing Company products or
services or to solicit or influence or attempt to influence any client, customer or other person either directly or indirectly,
to direct his or its purchase of products and/or services to any person, firm, corporation, institution or other entity in
competition with the business of the Company.
8. Representations
and
Covenants
.
(a)
Facilitation
of
Agreement
.
I agree to execute promptly any proper oath or verify any proper document
required to carry out the terms of this Agreement upon the Company’s written request to do so.
(b)
Conflicts
.
I represent that my performance of all the terms of this Agreement does not and will not breach
any agreement I have entered into, or will enter into with any third party, including without limitation any
agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to
commencement of my Relationship with the Company. I agree not to enter into any written or oral agreement
that conflicts with the provisions of this Agreement.
(c)
Voluntary
Execution
.
I certify and acknowledge that I have carefully read all of the provisions of this
Agreement and that I understand and will fully and faithfully comply with such provisions.
9. General
Provisions
.
(a)
Governing
Law
.
The validity, interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of California, without giving effect to the principles of conflict of laws.
(b)
Entire
Agreement
.
This Agreement sets forth the entire agreement and understanding between the
Company and me relating to the subject matter herein and merges all prior discussions between us. No
modification or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be
effective unless in writing signed by both parties. Any subsequent change or changes in my duties,
obligations, rights or compensation will not affect the validity or scope of this Agreement.
(c)
Severability
.
If one or more of the provisions in this Agreement are deemed void by law, then the
remaining provisions will continue in full force and effect.
(d)
Successors
and
Assigns
.
This Agreement will be binding upon my heirs, executors, administrators and
other legal representatives, and my successors and assigns, and will be for the benefit of the Company, its
successors, and its assigns.
(e)
Survival
.
The provisions of this Agreement shall survive the termination of the Relationship and the
assignment of this Agreement by the Company to any successor in interest or other assignee.
(f)
Remedies
. I acknowledge and agree that violation of this Agreement by me may cause the Company
irreparable harm, and therefore agree that the Company will be entitled to seek extraordinary relief in court,
including but not limited to temporary restraining orders, preliminary injunctions and permanent injunctions
without the necessity of posting a bond or other security and in addition to and without prejudice to any other
rights or remedies that the Company may have for a breach of this Agreement.
(g)
ADVICE
OF
COUNSEL
.
I ACKNOWLEDGE THAT, IN EXECUTING THIS AGREEMENT, I HAVE
HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I
HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.
THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE
DRAFTING OR PREPARATION HEREOF.
The parties have executed this Agreement on the respective dates set forth below:
COMPANY:
Jared Lucas – Chief People Officer
Printed Name and Title
/s/ Jared Lucas
Signature
December 28, 2015
Date
415 East Middlefield Road
Mountain View, CA 94043
Address
EMPLOYEE:
Daniel Fields
Printed Name and Title
/s/ Daniel Fields
Signature
12/29/2015
Date
Address
EXHIBIT
21
.1
SUBSIDIARIES
OF
MOBILEIRON,
INC.
EXHIBIT
21
.1
The following is a list of MobileIron, Inc.’s subsidiaries including their jurisdiction of incor poration as of December 31,
2015 :
Subsidiaries
MobileIron International, Inc.
MobileIron India Software Private Limited
Jurisdiction
of
Incorporation
Delaware, U.S.A.
India
Exhibit
23.1
CONSENT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-196762 and 333-207742 on Form S-8
of our report dated February 2 3 , 2016 , relating to the consolidated financial statements of MobileIron, Inc. and its subsidiaries
appearing in this Annual Report on Form 10-K of MobileIron, Inc. for the year ended December 31, 2015 .
Exhibit
23.1
/s/ DELOITTE & TOUCHE LLP
San Jose, California
February 2 3 , 2016
Exhibit
31.1
Exhibit
31.1
I, Barry Mainz , certify that:
1.
I have reviewed this Annual Report on Form 10-K of MobileIron, 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 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
c
(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 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:
(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: February 23 , 201 6
/s/ Barry Mainz
Barry Mainz
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit
31.2
Exhibit
31.2
I, Simon Biddiscombe , certify that:
1.
I have reviewed this Annual Report on Form 10-K of MobileIron, 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 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
The registrant’s other certifying officer 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.
d
5.
Date February 23 , 201 6
/s/ Simon Biddiscombe
Simon Biddiscombe
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit
32.1
CERTIFICATION
Exhibit
32.1
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Barry Mainz , President and Chief
Executive Officer (Principal Executive Officer) of MobileIron, Inc. (the “Company”), and Simon Biddiscombe , Chief Financial
Officer (Principal Financial and Accounting Officer) of the Company, each hereby certifies that, to the best of his or her
knowledge:
1.
2.
The Company’s Annual Report on Form 10-K for the period ended December 31, 2015 (the “Annual Report”), to which this
Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or Section 15(d) of the
Exchange Act, and
The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
I
N
W
ITNESS
W
HEREOF
, the undersigned have set their hands hereto as of the 2 3 rd day of February , 201 6 .
Arry
/s/ Barry Mainz
Barry Mainz
President and Chief Executive
(Principal Executive Officer)
/s/ Simon Biddiscombe
Simon Biddiscombe
Chief Financial Officer
(Principal Financial and Accounting Officer)
“This certification accompanies the Form 10- K to which it relates, is not deemed filed with the Securities and Exchange
Commission and is not to be incorporated by reference into any filing of MobileIron, Inc. under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10- K ),
irrespective of any general incorporation language contained in such filing.”