Related Party Transactions

3 Months Ended

Mar. 31, 2017

The Company has various agreements in place with related parties. Below are details of related party transactions that occurred during the three months ended March 31, 2016 and 2017.

Tregaron:

The Company has contracts with Tregaron India Holdings, LLC and its affiliates, including Diya Systems (Mangalore) Private Limited, Glowtouch Technologies Pvt. Ltd. and Touchweb Designs, LLC (collectively, “Tregaron”), for outsourced services, including email- and chat-based customer and technical support, network monitoring, engineering and development support and web design and web building services, and an office space lease. These entities are owned directly or indirectly by family members of the Company’s chief executive officer, who is also a director and stockholder of the Company.

The following table presents the amounts of related party transactions recorded in the consolidated statements of operations and comprehensive income (loss) for the periods presented relating to services provided by Tregaron and its affiliates under these agreements:

As of December 31, 2016, approximately $1.3 million was included in accounts payable and accrued expense relating to services provided by Tregaron. As of March 31, 2017, approximately $1.8 million was included in accounts payable and accrued expense relating to services provided by Tregaron.



	Three Months Ended March 31,
	2016		2017
	(in thousands)
Cost of revenue	$	3,100	$	2,900
Sales and marketing	100		100
Engineering and development	300		450
General and administrative	100		50
Total related party transaction expense, net	$	3,600	$	3,500

Innovative Business Services, LLC:

The Company also has agreements with Innovative Business Services, LLC (“IBS”), which provides multi-layered third-party security and website performance applications that are sold by the Company. IBS is indirectly majority owned by the Company’s chief executive officer and a director of the Company, each of whom are also stockholders of the Company. During the quarter ended March 31, 2017, the Company’s principal agreement with this entity was amended to permit the Company to purchase a specific IBS website performance product at no charge, and in exchange, to increase the revenue share to IBS on certain website performance products. The Company records revenue on the sale of IBS products on a net basis, since the Company views IBS as the primary obligor to deliver these services. As a result, the revenue share paid by the Company to IBS is recorded as contra-revenue. Further, IBS pays the Company a fee on sales made by IBS directly to customers of the Company. The Company records these fees as revenue.



	Three Months Ended March 31,
	2016			2017
	(in thousands)
Revenue	$	(600	)	$	(1,100	)
Revenue (contra)	2,100			2,200
Total related party transaction impact to revenue	$	1,500		$	1,100
Cost of revenue	200			200
Total related party transaction expense, net	$	1,700		$	1,300

As of December 31, 2016 and March 31, 2017, approximately $0.2 million and $0.1 million, respectively, was included in prepaid expenses and other current assets relating to the Company’s agreements with IBS.

As of December 31, 2016 and March 31, 2017, approximately $1.1 million and $1.5 million, respectively was included in accounts payable and accrued expense relating to the Company’s agreements with IBS.

As of December 31, 2016 and March 31, 2017, approximately $0.6 million and $0.7 million, respectively, was included in accounts receivable relating to the Company’s agreements with IBS.

Goldman, Sachs & Co.

The Company entered into a three-year interest rate cap on December 9, 2015 with a subsidiary of Goldman, Sachs & Co. Goldman, Sachs & Co. is a significant shareholder of the Company. Refer to Note 5: Fair Value Measurements, for further details.