10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

¨ 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: 001-35450

DEMANDWARE, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-0982939
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

5 Wall Street

Burlington, Massachusetts 01803

(Address of principal executive offices, including zip code)

(888) 553-9216

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

On August 5, 2013, the registrant had 30,625,832 shares of common stock, $0.01 par value per share, outstanding.

DEMANDWARE, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

		Page No.
PART I.—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)		3
	Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012		3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2013 and 2012		4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		18
Item 4.	Controls and Procedures		19
PART II.—OTHER INFORMATION
Item 1.	Legal Proceedings		20
Item 1A.	Risk Factors		20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 6.	Exhibits		34
SIGNATURES			35

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

DEMANDWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	June 30, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	70,510		$	58,877
Short-term investments		39,972			48,251
Accounts receivable—net of allowance for doubtful accounts and credit memos of $820 and $630 at June 30, 2013 and December 31, 2012, respectively		20,188			19,214
Prepaid expenses and other current assets		4,450			3,452
Total current assets		135,120			129,794
Property and equipment, net		9,904			8,377
Other assets		1,355			1,157
Total assets	$	146,379		$	139,328
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable	$	3,516		$	3,021
Accounts payable		2,142			3,168
Accrued expenses		12,675			8,348
Deferred revenue		18,859			11,105
Deferred rent		165			127
Total current liabilities		37,357			25,769
Long-term liabilities:
Deferred revenue		18,552			15,647
Notes payable		2,537			2,353
Deferred rent		921			969
Total liabilities		59,367			44,738
Contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.01 par value per share—10,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.01 par value per share —240,000 shares authorized, 30,516 and 29,842 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		305			298
Additional paid-in capital		179,894			170,997
Accumulated other comprehensive loss		(73	)		(17	)
Accumulated deficit		(93,114	)		(76,688	)
Total stockholders’ equity		87,012			94,590
Total liabilities and stockholders’ equity	$	146,379		$	139,328

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DEMANDWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenue:
Subscription	$	20,806		$	15,198		$	39,711		$	28,811
Services		2,401			3,162			4,010			5,639
Total revenue		23,207			18,360			43,721			34,450
Cost of revenue:
Subscription		4,080			3,040			8,044			5,906
Services		2,462			3,055			4,980			5,608
Total cost of revenue		6,542			6,095			13,024			11,514
Gross profit		16,665			12,265			30,697			22,936
Operating expenses:
Sales and marketing		14,180			9,568			25,556			15,906
Research and development		5,377			4,084			10,117			7,555
General and administrative		5,521			3,696			10,754			6,401
Total operating expenses		25,078			17,348			46,427			29,862
Loss from operations		(8,413	)		(5,083	)		(15,730	)		(6,926	)
Other income (expense):
Interest income		55			46			117			47
Interest expense		(68	)		(79	)		(147	)		(153	)
Other income (expense)		116			(447	)		(303	)		(649	)
Other income (expense), net		103			(480	)		(333	)		(755	)
Loss before income taxes		(8,310	)		(5,563	)		(16,063	)		(7,681	)
Income tax expense		145			70			364			196
Net loss		(8,455	)		(5,633	)		(16,427	)		(7,877	)
Accretion of redeemable convertible preferred stock		—			—			—			(1,172	)
Net loss attributable to common stockholders	$	(8,455	)	$	(5,633	)	$	(16,427	)	$	(9,049	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.28	)	$	(0.19	)	$	(0.55	)	$	(0.49	)
Weighted average common shares outstanding, basic and diluted		30,266			29,068			30,113			18,598
Net loss		(8,455	)		(5,633	)		(16,427	)		(7,877	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		21			(42	)		(36	)		(21	)
Unrealized loss on marketable securities		(10	)		(6	)		(20	)		(6	)
Comprehensive loss	$	(8,444	)	$	(5,681	)	$	(16,483	)	$	(7,904	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DEMANDWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June  30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(16,427	)	$	(7,877	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,195			1,540
Re-measurement of preferred stock warrant liability		—			426
Bad debt expense		53			—
Stock-based compensation		7,344			2,613
Deferred rent expense		(9	)		238
Other non-cash reconciling items		310			28
Changes in operating assets and liabilities:
Accounts receivable		(1,027	)		2,335
Prepaid expenses and other current assets		(463	)		(874	)
Other long term assets		(41	)		104
Accounts payable		(789	)		867
Accrued expenses		4,414			275
Deferred revenue		10,659			4,411
Net cash provided by operating activities		6,219			4,086
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(3,970	)		(3,156	)
Purchase of marketable securities		(30,649	)		(25,319	)
Sale and maturity of marketable securities		38,609			—
Increase in restricted cash and other assets		(154	)		(165	)
Net cash provided by (used in) investing activities		3,836			(28,640	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net of underwriting discounts and commissions		—			94,116
Proceeds from exercise of stock options		1,561			403
Deferred offering costs		—			(1,465	)
Proceeds from issuance of notes payable		1,997			2,600
Payments of equipment notes		(1,432	)		(1,265	)
Payments of software financing agreement		(467	)		—
Net cash provided by financing activities		1,659			94,389
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS		(81	)		(37	)
INCREASE IN CASH AND CASH EQUIVALENTS		11,633			69,798
CASH AND CASH EQUIVALENTS—Beginning of period		58,877			14,939
CASH AND CASH EQUIVALENTS—End of period	$	70,510		$	84,737
SUPPLEMENTARY INFORMATION:
Interest paid	$	202		$	130
Income taxes paid	$	214		$	154
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of redeemable convertible preferred stock to common stock	$	—		$	88,775
Conversion of preferred stock warrant to common stock warrant	$	—		$	533
Deferred offering costs included in accounts payable and accrued expenses	$	—		$	140
Purchase of property and equipment included in accounts payable and accrued expenses	$	71		$	111
Software license acquired by assuming directly related liabilities	$	—		$	1,212
Software license technical support acquired by assuming directly related liabilities	$	561		$	549

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DEMANDWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Overview—Demandware, Inc. (the “Company”) provides cloud-based digital commerce solutions that enable companies to easily design, implement and manage their own customized digital commerce sites, including websites, mobile applications and other digital storefronts. The Company’s digital commerce platform, Demandware Commerce, enables customers to establish and execute complex digital commerce strategies that include global expansion, multi-brand rollouts and omni-channel operations. The Company’s customers use its highly scalable and integrated Demandware Commerce platform to create a seamless brand experience for consumers across all digital touch points worldwide.

The Company sells subscriptions to its on-demand software and related services through a direct sales force and indirect channels. The Company’s customers consist of retailers and branded manufacturers that operate principally in the following vertical markets: apparel and footwear, health and beauty, home and garden, sporting goods and general merchandise.

The Company’s headquarters are located in Burlington, Massachusetts. At June 30, 2013, the Company had seven subsidiaries: Demandware Securities Corporation, Demandware GmbH, Demandware UK Limited, Demandware SARL and Demandware Hong Kong Limited, each of which is wholly owned by the Company, and Demandware E-Commerce (Shanghai) Limited and Demandware Australia Pty Limited, each of which is a wholly owned subsidiary of Demandware Hong Kong Limited.

Initial Public Offering—In March 2012, the Company closed its initial public offering (“IPO”) of 6,325,000 shares of common stock, including 825,000 shares sold pursuant to the underwriters’ option to purchase additional shares, at an offering price of $16.00 per share. The Company’s common stock is traded on the New York Stock Exchange under the symbol “DWRE”. The Company received proceeds from the IPO of $94.1 million, net of underwriting discounts and commissions, but before offering expenses of $3.1 million.

Basis of Presentation and Significant Accounting Policies—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission ( “SEC”), and on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2012. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional information relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. Interim results are not necessarily indicative of the results for any other interim period or for the entire year.

At December 31, 2012, the Company reassessed the estimated expected life of its customers and estimated it to be slightly greater than six years. Previously, the Company’s estimated expected customer life ranged from three to six years. This change in accounting estimate affected the amortization of setup fees and service implementation revenue, decreasing subscription and services revenue by $0.1 million and $0.4 million, respectively, for the three months ended June 30, 2013, and by $0.2 million and $0.8 million, respectively, for the six months ended June 30, 2013. As a result, the Company’s loss from operations, net loss and net loss per share increased by $0.5 million, $0.5 million and $0.02, respectively, for the three months ended June 30, 2013, and by $1.0 million, $1.0 million and $0.03, respectively, for the six months ended June 30, 2013.

The condensed consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 8, 2013.

Recent Accounting Pronouncements—On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of a Liability for an Unrecognized Tax Benefit When a Net Operating Loss or Tax Credit Carryforward Exists.” This accounting update requires that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward or other tax credit carryforward when settlement in this manner is available under applicable tax law. This guidance is effective for the Company’s interim and annual periods beginning January 1, 2014. The Company does not believe the adoption of this guidance will have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

2. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

The following common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders because they had an anti-dilutive impact (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Options to purchase common stock		3,879		4,793		4,012		4,374
Unvested restricted stock		888		474		834		237
Warrant		—		23		—		23

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3. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

A summary of the Company’s cash equivalents and short-term investments at June 30, 2013 is as follows (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash Equivalents:
Money market funds	$	51,961	$	—	$	—		$	51,961
Certificates of deposit		499		—		—			499
Municipal securities		6,376		1		—			6,377
Total	$	58,836	$	1	$	—		$	58,837
Short-Term Investments:
U.S. government agency bonds	$	2,210	$	—	$	—		$	2,210
Corporate bonds and commercial paper		6,194		—		(1	)		6,193
Municipal securities		21,196		5		(11	)		21,190
Certificates of deposit		10,379		—		—			10,379
Total	$	39,979	$	5	$	(12	)	$	39,972

A summary of the Company’s cash equivalents and short-term investments at December 31, 2012 is as follows (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash Equivalents:
Money market funds	$	48,089	$	—	$	—		$	48,089
Certificates of deposit		1,933		—		—			1,933
Municipal securities		2,070		—		—			2,070
Total	$	52,092	$	—	$	—		$	52,092
Short-Term Investments:
U.S. government agency bonds	$	16,714	$	5	$	—		$	16,719
Corporate bonds and commercial paper		15,397		2		(1	)		15,398
Municipal securities		7,412		7		—			7,419
Certificates of deposit		8,714		1		—			8,715
Total	$	48,237	$	15	$	(1	)	$	48,251

The contractual maturity dates for the Company’s available-for-sale investments that are classified as short-term investments in the consolidated balance sheets are one year or less from the respective balance sheet dates.

4. FAIR VALUE MEASUREMENTS

Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than the quoted prices in active markets that are observable either directly or indirectly (Level 2); and unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions (Level 3). This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including the Company’s cash equivalents.

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The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities at June 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements Using
	Amounts at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At June 30, 2013
Assets—Cash Equivalents:
Money market funds	$	51,961	$	51,961	$	—	$	—
Certificates of deposit		499		—		499		—
Municipal securities		6,377		—		6,377		—
Assets—Short-Term Investments:
U.S. government agency bonds	$	2,210	$	—	$	2,210	$	—
Corporate bonds and commercial paper		6,193		—		6,193		—
Municipal securities		21,190		—		21,190		—
Certificates of deposit		10,379		—		10,379		—
At December 31, 2012
Assets—Cash Equivalents:
Money market funds	$	48,089	$	48,089	$	—	$	—
Certificates of deposit		1,933		—		1,933		—
Municipal securities		2,070		—		2,070		—
Assets—Short-Term Investments:
U.S. government agency bonds	$	16,719	$	—	$	16,719	$	—
Corporate bonds and commercial paper		15,398		—		15,398		—
Municipal securities		7,419		—		7,419		—
Certificates of deposit		8,715		—		8,715		—

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. If market prices are not available, the fair value measurement is based on models that use primarily market based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

The valuation technique used to measure fair value for the Company’s Level 1 and Level 2 assets and liabilities is a market approach that uses prices and other relevant information generated by market transactions involving identical or comparable assets. As of June 30, 2013 and December 31, 2012, the Company did not carry any Level 3 assets or liabilities.

5. DEBT

Equipment Notes Payable—The Company’s loan and security agreement (the “2008 Loan Agreement”) was amended in May 2009 to include a $2.0 million equipment line of credit (the “Loan”). Borrowings under the Loan could be made for eligible equipment purchases through December 31, 2009. The Loan was again amended in April 2010, June 2011, June 2012 and June 2013, which increased the available borrowings by an additional $4.0 million, $4.0 million, $3.0 million and $3.0 million, respectively. Each advance under the Loan is payable in 36 equal monthly payments of principal plus accrued interest, at an annual rate of 3.75%. The last payment on the Loan is due June 1, 2016. The 2008 Loan Agreement is secured by substantially all of the Company’s assets, except its intellectual property.

At June 30, 2013 and December 31, 2012, the outstanding balance under the Loan was $4.7 million and $4.1 million, respectively. As of June 30, 2013, the Company had $1.6 million of available borrowings under the Loan for eligible equipment purchases through April 30, 2014.

Software Financing—In May 2012, the Company entered into a $1.8 million agreement to finance the purchase of a perpetual software license and the related first year technical support (the “Software Finance Agreement”). The Software Finance Agreement is secured by the financed assets. The financed amount is due in 12 equal quarterly payments of principal plus accrued interest, at an annual rate of 5.40% through April 1, 2015. In May 2013, the Company renewed the related technical support for a second year, increasing the financed amount by $0.5 million. At June 30, 2013 and December 31, 2012, the outstanding balance under the Software Finance Agreement was $1.4 million and $1.3 million, respectively.

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6. CONTINGENCIES

Litigation—In the ordinary course of business, the Company is involved in litigation incidental to its business, certain of which includes speculative claims for substantial or indeterminate amounts of damages. The Company records a liability when it believes that a loss is both probable and reasonably estimable. On a quarterly basis, the Company reviews each of its legal proceedings to determine whether it is probable, reasonably possible or remote that a liability has been incurred and, if it is at least reasonably possible, whether a range of loss can be reasonably estimated. Significant judgment is required to determine both the likelihood of there being a loss and the estimated amount of a loss. The Company’s management is not aware of any pending legal proceeding or other loss contingency, whether asserted or unasserted, affecting the Company for which it might become liable or the outcome of which management expects to have a material impact on the Company. However, the outcome of legal matters is inherently unpredictable and subject to significant uncertainties.

7. STOCK-BASED AWARDS

Stock Options—The Company’s stock options generally vest over a four-year period and expire 10 years from the date of grant. Upon the exercise of an option, the Company issues shares of common stock.

The following table summarizes information related to stock options outstanding as of June 30, 2013 (in thousands, except per share and term information):

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Exercisable—June 30, 2013		2,234	$	5.82		6.77	$	81,724
Options vested and expected to vest—June 30, 2013		3,556		10.99		7.33		111,737

Unrecognized compensation expense relating to stock options was $15.2 million at June 30, 2013, which is expected to be recognized over a weighted-average period of approximately three years.

Restricted Stock Awards—The Company’s restricted stock awards generally vest over a two- or four-year period and upon vesting, the Company issues shares of common stock. Unrecognized compensation expense relating to restricted stock awards was $26.0 million at June 30, 2013, which is expected to be recognized over a weighted-average period of approximately three years.

Stock-Based Compensation—Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the service period (generally the vesting period of the equity grant). The Company estimates forfeitures at the time of grant and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The following table presents stock-based compensation expense included in the Company’s consolidated statements of comprehensive income (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of subscription revenue	$	95	$	56	$	210	$	62
Cost of service revenue		233		230		615		259
Sales and marketing		979		589		2,075		678
Research and development		822		505		1,735		550
General and administration		1,229		854		2,709		1,064
Total	$	3,358	$	2,234	$	7,344	$	2,613

Stock-based compensation cost for the three months ended June 30, 2013 and 2012 includes $1.9 million and $0.9 million related to restricted stock, respectively. Stock-based compensation cost for the six months ended June 30, 2013 and 2012 includes $4.1 million and $0.9 million, respectively, related to restricted stock. The remaining expense for each period relates to stock options.

8. INCOME TAXES

The Company’s income tax provisions for the three and sixth months then ended June 30, 2013 and 2012 reflects its estimates of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events which are recorded in the period they occur. The estimates are reevaluated each quarter based on the Company’s estimated tax expense for the full fiscal year.

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The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Management has determined that it is more likely than not that the Company will not utilize the benefits of federal and state deferred tax assets for financial reporting purposes. Accordingly, the deferred tax assets have been fully reserved at June 30, 2013 and December 31, 2012.

The Company files federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. With few exceptions, all tax years 2004 through 2012 remain subject to examination by federal and certain state tax authorities due to the Company’s net operating loss carryforwards. The Company is subject to examination by various foreign jurisdictions for years after 2008. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance that taxing authorities will not propose adjustments that are more or less than its expected outcome. It is not expected that the amount of unrecognized tax benefits will be recognized in the next twelve months. In addition, the Company does not expect the change in uncertain tax positions to have a material impact on its financial position, results of operations or liquidity.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that look to future events and consist of, among other things, statements regarding our business strategies; anticipated future operating results and operating expenses; our ability to attract new customers to enter into subscriptions for our solution; our ability to service those customers effectively and induce them to renew and upgrade their deployments of our solution; our ability to expand our sales organization to address effectively the new industries, geographies and types of organizations we intend to target; our ability to accurately forecast revenue and appropriately plan our expenses; market acceptance of enhanced solutions; alternate ways of addressing digital commerce needs or new technologies generally by us and our competitors; continued acceptance of software-as-a-service, or SaaS, as an effective method for delivering digital commerce solutions and other applications; the attraction and retention of qualified employees and key personnel; our ability to protect and defend our intellectual property; costs associated with defending intellectual property infringement and other claims; events in the markets for our solution and alternatives to our solution, as well as in the United States and global markets generally; future regulatory, judicial and legislative changes in our industry; and changes in the competitive environment in our industry and the markets in which we operate. In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” and similar expressions or the negative of such terms or other comparable terminology, although not all forward-looking statements contain these words. These forward-looking statements speak only as of the date of this Form 10-Q and are subject to business and economic risks. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict, and you should not place undue reliance on our forward-looking statements. Our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors set forth in this Item 2, in Part II, Item 1A, “Risk Factors,” elsewhere in this Form 10-Q and in our other reports filed with the Securities and Exchange Commission, or SEC. We expressly disclaim any obligation to update the forward-looking statements to reflect events or circumstances that arise after the date hereof.

Overview

We are a leading provider of cloud-based digital commerce solutions for retailers and branded manufacturers. Our digital commerce platform, Demandware Commerce, enables customers to establish and execute complex digital commerce strategies that include global expansion, multi-brand rollouts and omni-channel operations. We enable companies to easily design, implement and manage their own customized digital commerce sites, including websites, mobile applications and other digital storefronts. Through our highly scalable and open Demandware Commerce platform, our customers create seamless brand experiences to reach their consumers across all digital touch points globally.

We sell subscriptions to our on-demand software and related services through a direct sales force and indirect channels. Our customers consist of retailers and branded consumer product manufacturers that operate principally in the following vertical markets: apparel and footwear, general merchandise, health & beauty, home & garden, toys and sporting goods and other vertical categories.

We derive most of our revenue from subscriptions to our on-demand platform and related services. Subscription fees are generally based on a revenue share pricing model, in which our customers pay us a percentage of their total gross revenue that is processed on our platform. As part of their subscription fee, our customers commit to a minimum level of gross revenue to be processed on our platform, from which a minimum monthly, quarterly or annual, non-refundable subscription fee is derived. If a customer processes on our platform more gross revenue than its committed minimum level, then the customer is required to pay us additional fees, called overage fees, which are calculated as a percentage of the incremental revenue generated above the committed revenue. While we typically record overage fees each quarter, a significant portion of the aggregate overage fees we receive annually is recorded in the fourth quarter. No refunds or credits are given if a customer processes less gross revenue than the contracted level. Customer contracts are generally non-cancellable for a minimum term that is generally three years and range up to seven years.

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Subscription revenue is driven primarily by the number of customers we have, the number of digital commerce sites they operate on our platform, the contracted minimum value of our subscription agreements and the gross revenue generated from our customers in excess of their committed minimum levels. To date, revenue generated by our customers’ traditional web e-commerce sites has been the primary driver of our subscription revenue. However, we believe that our omni-channel capabilities, including mobile, social and other digital channels, have been and will continue to be important factors in our new customers’ purchasing decisions.

We derive our services revenue from the implementation of our customers’ digital commerce sites, which includes the integration of complementary technologies and adaptation to back-end systems and/or business processes and the configuration and deployment of the customers’ sites. We also provide training services for individuals who are part of the implementation, maintenance and optimization teams of our customers. In general, it takes approximately six months to implement a new customer site on our platform. Incremental sites for a customer, including for additional brands or geographies, can be implemented in less than one month.

Deferred revenue primarily consists of the unearned portion of billed services fees and fees for our on-demand software. As we invoice nearly all of our customers on a monthly or quarterly basis, our deferred revenue balance does not serve as a reliable indicator of our future subscription revenue.

We believe the large and growing market for cloud-based digital commerce solutions will provide us with significant growth opportunities. As digital commerce transactions continue to account for a greater proportion of all retail sales, we believe that retailers and branded consumer product manufacturers will continue to enhance the performance and functionality of their digital commerce sites, increase their number of sites and expand their online presence to encompass multiple digital channels such as in-store digital solutions. Just as companies have increasingly chosen cloud-based solutions as an alternative to costly and inflexible on-premise solutions for their enterprise-wide applications, we believe that retailers and branded consumer product manufacturers will increasingly adopt cloud-based solutions for their digital commerce needs.

We are focused on growing our business by pursuing the significant market opportunity for cloud-based digital commerce solutions. We plan to grow our revenue by adding new customers and helping our existing customers increase their revenue processed on our platform by taking full advantage of the functionality of Demandware Commerce, by increasing the number of sites deployed by them and by extending their online presence across multiple channels, including mobile applications, social networks, call centers and in-store applications. We also plan to expand our customer base to include industry sectors, customer segments and geographic regions beyond those which we currently serve.

Initial Public Offering

In March 2012, we closed our initial public offering, or IPO, of 6,325,000 shares of common stock, including 825,000 shares sold pursuant to the underwriters’ option to purchase additional shares, at an offering price of $16.00 per share. All then outstanding shares of our redeemable convertible preferred stock converted to 18,028,763 shares of common stock at the closing of the IPO. Our common stock is traded on the New York Stock Exchange. We received proceeds from the IPO of $94.1 million, net of underwriting discounts and commissions but before offering expenses of $3.1 million.

Key Metrics

We regularly review a number of metrics to evaluate growth trends, measure our performance, formulate financial projections and make strategic decisions. We discuss revenue, gross margin, and the components of operating income and margin under “Key Components of Our Results of Operations,” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed with the SEC on March 8, 2013, and we discuss other key metrics below.

Number of Customers

We believe that our ability to expand our customer base is an indicator of our market penetration and growth of our business as we continue to invest in our direct sales force, our indirect sales channels and marketing initiatives. We define our number of customers at the end of a particular quarter as the number of customers generating subscription revenue during the period, and who have a committed minimum level of gross revenue to be processed on our platform, from which a minimum monthly, quarterly or annual, non-refundable subscription fee is derived. As of June 30, 2013, we had 162 customers.

Number of Customer Sites

Since our customers generally operate more than one digital commerce site across various geographies and brands and pay us fees based on the total gross revenue they process on our platform, we believe the total number of customer sites using our solutions in a given quarter is an indicator of the growth of our business. As of June 30, 2013, our customers were operating 667 sites on our platform.

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Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed with the SEC on March 8, 2013 have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies.

As of June 30, 2013, there have been no material changes to our critical accounting policies since December 31, 2012.

Results of Operations

The following table sets forth our results of operations for each of the periods indicated as dollars (in thousands). The period-to-period comparison of financial results is not necessarily indicative of future results.

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Results of Operations:
Revenue:
Subscription	$	20,806		$	15,198		$	39,711		$	28,811
Services		2,401			3,162			4,010			5,639
Total revenue		23,207			18,360			43,721			34,450
Cost of revenue:
Subscription		4,080			3,040			8,044			5,906
Services		2,462			3,055			4,980			5,608
Total cost of revenue		6,542			6,095			13,024			11,514
Gross profit		16,665			12,265			30,697			22,936
Operating expenses:
Sales and marketing		14,180			9,568			25,556			15,906
Research and development		5,377			4,084			10,117			7,555
General and administrative		5,521			3,696			10,754			6,401
Total operating expenses		25,078			17,348			46,427			29,862
Loss from operations		(8,413	)		(5,083	)		(15,730	)		(6,926	)
Other income (expense), net		103			(480	)		(333	)		(755	)
Loss before income taxes		(8,310	)		(5,563	)		(16,063	)		(7,681	)
Income tax expense		145			70			364			196
Net loss	$	(8,455	)	$	(5,633	)	$	(16,427	)	$	(7,877	)

Revenue and Metrics

Revenue

	Three Months Ended June 30,						Change						Six Months Ended June 30,						Change
	2013			2012			$			%			2013			2012			$			%
	(dollars in thousands)
Subscription revenue	$	20,806		$	15,198		$	5,608			36.9	%	$	39,711		$	28,811		$	10,900			37.8	%
Percentage of total revenue		89.7	%		82.8	%								90.8	%		83.6	%
Services revenue	$	2,401		$	3,162		$	(761	)		(24.1	)%	$	4,010		$	5,639		$	(1,629	)		(28.9	)%
Percentage of total revenue		10.3	%		17.2	%								9.2	%		16.4	%

Subscription revenue. Subscription revenue for the three months ended June 30, 2013 increased by $5.6 million, or 36.9%, compared to the three months ended June 30, 2012. The increase was driven primarily by an increase of $3.7 million in revenue from new customers. We had 162 customers and 667 digital commerce sites operating on our platform at June 30, 2013, an increase from 124 customers and 445 digital commerce sites operating on our platform at June 30, 2012. In addition, revenue from existing customers net of revenue declines from customer terminations grew $1.9 million in the 2013 period. Revenue realized from overage fees increased from $4.1 million to $6.9 million, and represented 26.9% and 33.1% of subscription revenue, for the three months ended June 30, 2012 and 2013, respectively.

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Subscription revenue for the six months ended June 30, 2013 increased by $10.9 million, or 37.8%, compared to the six months ended June 30, 2012. The increase was driven primarily by an increase of $7.0 million in revenue from new customers. In addition, revenue from existing customers net of revenue declines from customer terminations grew $3.9 million in the 2013 period. Revenue realized from overage fees increased from $7.7 million to $12.7 million, and represented 26.6% and 31.9% of subscription revenue, for the six months ended June 30, 2012 and 2013, respectively.

Services revenue. Services revenue for the three months ended June 30, 2013 decreased by $0.8 million, or (24.1%), compared to the three months ended June 30, 2012. We recognize service revenue performed after our customers have launched their sites on our platform as such services are delivered, and we performed $0.3 million less of these services during the 2013 period as compared to the 2012 period. We recognize billings received for our implementation and training service engagements that are sold with the subscription prior to the customer’s use of our digital commerce platform ratably over the estimated life of our customer base, which was three to six years for revenue recognized in the 2012 period, and slightly greater than six years for revenue recognized in the current period. Revenue from service engagements sold with the subscription declined $0.8 million compared to the three months ended June 30, 2012, with $0.4 million of the decrease due to the change in estimated expected customer life that was assessed at December 31, 2012, and $0.4 million of the decrease due to our realizing the remaining portion of the deferred services revenue balance in the fourth quarter of 2012 from one large customer, as a result of the bankruptcy filing by that customer, and the cessation of that relationship. This $0.8 million decrease in revenue from service engagements sold with the subscription was offset by an increase in revenues from more customers and sites operating on our platform during the three months ended June 30, 2013 compared to the three months ended June 30, 2012. Additionally, fees received from sponsors of and participants attending our global customer conference during the three months ended June 30, 2013 increased by $0.3 million when compared to the same 2012 period.

Services revenue for the six months ended June 30, 2013 decreased by $1.6 million, or (28.9%), compared to the six months ended June 30, 2012. The decrease was driven by $0.7 million less in services performed after our customers launched their sites on our platform during the 2013 period as compared to the 2012 period. We recognize billings received for our implementation and training service engagements that are sold with the subscription prior to the customer’s use of our digital commerce platform ratably over the estimated life of our customer base, which was three to six years for revenue recognized in the 2012 period, and just over six years for revenue recognized in the current period. Revenue from service engagements sold with the subscription declined $1.4 million compared to the six months ended June 30, 2012, with $0.8 million of the decrease due to the change in estimated expected customer life that was assessed at December 31, 2012, and $0.9 million of the decrease due to our realizing the remaining portion of the deferred services revenue balance in the fourth quarter of 2012 from one large customer, as a result of the bankruptcy filing by that customer, and the cessation of that relationship. These decreases in service revenue were offset by a $0.3 million increase in fees received from sponsors of and participants attending our global customer conference during the six months ended June 30, 2013 when compared to the same 2012 period, and by a $0.3 million increase in LINK Partner membership program revenue during the six months ended June 30, 2013 when compared to the same 2012 period.

Cost of Revenue

	Three Months Ended June 30,						Change						Six Months Ended June 30,						Change
	2013			2012			$			%			2013			2012			$			%
	(dollars in thousands)
Cost of subscription revenue	$	4,080		$	3,040		$	1,040			34.2	%	$	8,044		$	5,906		$	2,138			36.2	%
Percentage of subscription revenue		19.6	%		20.0	%								20.3	%		20.5	%
Gross margin		80.4	%		80.0	%								79.7	%		79.5	%
Cost of services revenue	$	2,462		$	3,055		$	(593	)		(19.4	)%	$	4,980		$	5,608		$	(628	)		(11.2	)%
Percentage of services revenue		102.5	%		96.6	%								124.2	%		99.5	%
Gross margin		(2.5	)%		3.4	%								(24.2	)%		0.5	%

Cost of subscription revenue. Cost of subscription revenue for the three months ended June 30, 2013 increased by $1.0 million, or 34.2%, compared to the three months ended June 30, 2012. The increase was primarily attributable to $0.4 million of increased depreciation, maintenance, and equipment and software support expenses associated with equipment for our data centers and $0.4 million of increased hosting and bandwidth expenses due to an expansion of our capacity to accommodate the growth during the 2013 period. In addition, we increased our headcount in our support and technical operations team by 5 employees, or 16.7%, in the 2013 period. As a result, our personnel and related expenses, such as salaries, bonuses, payroll taxes, recruiting fees and stock compensation, increased $0.2 million in the 2013 period.

Cost of subscription revenue for the six months ended June 30, 2013 increased by $2.1 million, or 36.2%, compared to the six months ended June 30, 2012. The increase was primarily attributable to $0.7 million of increased depreciation, maintenance, and equipment and software support expenses associated with equipment for our data centers and $1.0 million of increased hosting and bandwidth expenses due to an expansion of our capacity to accommodate the growth during the 2013 period. In addition, we increased our headcount in our support and technical operations team by 16.7% in the 2013 period. As a result, our personnel and related expenses, such as salaries, bonuses, payroll taxes, recruiting fees and stock compensation, increased by $0.4 million in 2013.

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Cost of services revenue. Cost of services revenue for the three months ended June 30, 2013 decreased by $0.6 million, or (19.4%), compared to the three months ended June 30, 2012. The decrease was primarily attributable to $0.7 million of decreased outside consulting expenses resulting from a decreased use of third-party contractors to assist our direct services implementation teams, offset by $0.1 million of increased personnel and related expenses. While we experienced an increase in the number of customers in the implementation phase during the three months ended June 30, 2013, all of the implementations in process during that period were led by third party integrators. Therefore, we did not record any outside consulting expenses due to third-party contractors assisting our direct services implementation teams during the three months ended June 30, 2013. Our increased use of third party integration partners to service customer implementations has allowed us to enable more customers to launch sites on our platform while minimizing the additional headcount required by us to perform the implementation, which has enabled us to control our internal costs.

Cost of services revenue for the six months ended June 30, 2013 decreased by $0.6 million, or (11.2%), compared to the six months ended June 30, 2012. The decrease was primarily attributable to $1.0 million of decreased outside consulting expenses resulting from a decreased use of third-party contractors to assist our direct services implementation teams, offset by $0.4 million of increased stock compensation expense. While we experienced an increase in the number of customers in the implementation phase during the six months ended June 30, 2013, because more of our implementations were led by third party integrators, the number of implementations performed directly and solely by our client service team decreased by 91% when compared to the six months ended June 30, 2012. Our increased use of third party integration partners to service customer implementations has allowed us to enable more customers to launch sites on our platform while minimizing the additional headcount required by us to perform the implementation, which has enabled us to control our internal costs.

Operating Expenses

Sales and Marketing

	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
	2013			2012			$		%			2013			2012			$		%
	(dollars in thousands)
Sales and marketing	$	14,180		$	9,568		$	4,612		48.2	%	$	25,556		$	15,906		$	9,650		60.7	%
Percentage of total revenue		61.1	%		52.1	%							58.5	%		46.2	%

Sales and Marketing. Sales and marketing expenses for the three months ended June 30, 2013 increased by $4.6 million, or 48.2%, compared to the three months ended June 30, 2012. The increase was attributable to the continued expansion of our sales force to address increased opportunities in new and existing markets. Total headcount within sales and marketing increased from 112 at June 30, 2012 to 143 at June 30, 2013, an increase of 27.7%. We added employees within our direct sales, retail practice and marketing organizations in North America, Europe, and Asia Pacific, which contributed to $1.6 million of increased personnel and related expenses, of which $0.4 million was related to stock compensation expense. In addition, commissions and sales bonuses increased by $1.1 million, or 54.6%, in the 2013 period as a result of an increase in new customers acquired during the 2013 period. Additionally, marketing program expenses increased $0.9 million in the 2013 period as we increased the level of spending to enhance our global brand. Finally, we incurred $0.5 million of increased travel and entertainment expenses and $0.3 million of increased costs such as rent, information technology, or IT, costs and depreciation and amortization expenses incurred as a result of our growth.

Sales and marketing expenses for the six months ended June 30, 2013 increased by $9.7 million, or 60.7%, compared to the six months ended June 30, 2012. The increase was attributable to increases in marketing programs and the expansion of our sales force to address increased opportunities in new and existing markets. Total headcount within sales and marketing increased from 112 at June 30, 2012 to 143 at June 30, 2013, an increase of 27.7%. We added employees within our direct sales, business development and marketing organizations in North America, Europe, and Asia Pacific, which contributed to $4.2 million of increased personnel and related expenses, of which $1.4 million was related to stock compensation expense. In addition, commissions and sales bonuses increased by $2.1 million, or 62.8%, in the 2013 period as a result of an increase in new customers acquired during the 2013 period. Additionally, marketing program expenses increased $1.9 million in the 2013 period. Finally, we incurred $0.6 million of increased travel and entertainment expenses and $0.6 million of increased costs such as rent, IT costs and depreciation and amortization expenses incurred as a result of our growth.

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Research and Development

	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
	2013			2012			$		%			2013			2012			$		%
	(dollars in thousands)
Research and Development	$	5,377		$	4,084		$	1,293		31.7	%	$	10,117		$	7,555		$	2,562		33.9	%
Percentage of total revenue		23.2	%		22.2	%							23.1	%		21.9	%

Research and Development. Research and development expenses for the three months ended June 30, 2013 increased by $1.3 million, or 31.7%, compared to the three months ended June 30, 2012. The increase was attributable to investments made to enhance the functionality of our e-commerce platform. We increased our engineering headcount by 23 employees, or 37.1%, in the 2013 period, which contributed to increased personnel and related expenses of $1.6 million, of which $0.3 million related to stock compensation expense. Finally, we incurred $0.1 million of increased travel and entertainment expenses and $0.2 million of increased costs, such as rent, IT costs and depreciation and amortization expenses incurred as a result of our growth. As a direct result of our strong hiring efforts, we decreased contractor costs $0.7 million in the 2013 period.

Research and development expenses for the six months ended June 30, 2013 increased by $2.6 million, or 33.9%, compared to the six months ended June 30, 2012. The increase was attributable to investments made to enhance the functionality of our e-commerce platform. The increase in our engineering headcount by 23 employees, or 37.1%, in the 2013 period, contributed to increased personnel and related expenses of $3.2 million, of which $1.2 million related to stock compensation expense. Finally, we incurred $0.1 million of increased travel and entertainment expenses and $0.3 million of increased costs such as rent, IT costs and depreciation and amortization expenses incurred as a result of our growth. As a direct result of our strong hiring efforts, we decreased contractor costs $1.2 million in the 2013 period.

General and Administrative

	Three Months Ended June,						Change					Six Months Ended June 30,						Change
	2013			2012			$		%			2013			2012			$		%
	(dollars in thousands)
General and administrative	$	5,521		$	3,696		$	1,825		49.4	%	$	10,754		$	6,401		$	4,353		68.0	%
Percentage of total revenue		23.8	%		20.1	%							24.6	%		18.6	%

General and Administrative. General and administrative expenses for the three months ended June 30, 2013 increased by $1.8 million, or 49.4%, compared to the three months ended June 30, 2012. The increase was attributable to increased employee-related costs and professional fees to support our growing business. We incurred increased personnel and related costs of $1.2 million, of which $0.4 million related to stock compensation expense, and increased professional fees of $0.3 million for accounting, audit, and tax services incurred to support the expansion and growth of our business. Finally, we incurred $0.1 million of increased travel and entertainment expenses and $0.2 million of increased costs such as rent, IT costs and depreciation and amortization expenses incurred as a result of our growth.

General and administrative expenses for the six months ended June 30, 2013 increased by $4.4 million, or 68.0%, compared to the six months ended June 30, 2012. The increase was attributable to increased employee-related costs and professional fees to support our growing business. We incurred increased personnel, consulting and related costs of $3.1 million, of which $1.6 million related to stock compensation expense, and increased professional fees of $0.5 million for accounting, audit, legal and tax services incurred as a result of our transition from a private company to a public company and to support the expansion and growth of our business. Additionally, our insurance expense increased $0.1 million over the prior period also a direct result of our transition from a private company to a public company. We also incurred $0.4 million of increased costs such as rent, IT costs and depreciation and amortization expenses to support our growing company as well as increased miscellaneous state taxes of $0.1 million as a result of expanding into new states in the United States. Finally, we incurred $0.1 million of increased travel expenses as a result of our growth.

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Other Income (Expense)

	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
	2013			2012			$		%			2013			2012			$		%
	(dollars in thousands)
Other income (expense)	$	103		$	(480	)	$	583		121.5	%	$	(333	)	$	(755	)	$	422		55.9	%
Percentage of total revenue		0.4	%		(2.6	%)							(0.8	%)		(2.2	%)

Other Income (Expense). Other income (expense) for the three months ended June 30, 2013 increased $0.6 million, from other expense of $0.5 million in the 2012 period to other income of $0.1 million in the 2013 period. The increase was primarily attributable to $0.1 million in foreign exchange gains related to fluctuations in the British pound sterling and Euro in relation to the U.S. Dollar in the 2013 period compared to foreign exchange losses of $0.4 million in the 2012 period.

Other expense for the six months ended June 30, 2013 increased $0.4 million, from other expense of $0.8 million in the 2012 period to other expense of $0.3 million in the 2013 period. The increase was attributable to an $0.1 million increase in interest income. Additionally, during the 2012 period, we incurred $0.4 million in other expense due to the increase in the fair value of our warrant which was no longer outstanding in the 2013 period. These increases were offset by a $0.1 million increase in foreign exchange losses related to fluctuations in the British pound sterling and Euro in relation to the U.S. Dollar in the 2013 period compared to the 2012 period.

Liquidity and Capital Resources

To date, we have financed our operations primarily through the sale of equity securities, including net cash proceeds from our IPO in March 2012, in which we raised approximately $94.1 million, net of underwriting discounts and commissions but before offering expenses of $3.1 million.

Our cash, cash equivalents and marketable securities totaled $110.5 million at June 30, 2013.

At June 30, 2013, our principal sources of liquidity were $70.5 million of cash and cash equivalents and $1.6 million of borrowings available for eligible equipment purchases under our loan and security agreement, or 2008 Loan Agreement.

In June 2013, we amended the 2008 Loan Agreement and increased the available borrowings by an additional $3.0 million for equipment purchases to be made through April 30, 2014. Each advance is payable over 36 months at a fixed rate of 3.75%. The 2008 Loan Agreement is secured by substantially all of our assets, except our intellectual property. The 2008 Loan Agreement also contains various covenants that limit, among other things, indebtedness, investments, liens, transactions and certain mergers and sales of assets. In addition, the loan contains financial covenants that impose a minimum adjusted quick ratio (as defined in the 2008 Loan Agreement). We were in compliance with all such covenants at June 30, 2013.

Based on our current level of operations and anticipated growth, we believe our future cash flows from operating activities, existing cash and cash equivalents will provide adequate funds for our ongoing operations for at least the next twelve months. Our future capital requirements will depend on many factors, including our rate of revenue, billings growth and collections, the level of our sales and marketing efforts, the timing and extent of spending to support product development efforts and expansion into new territories, the timing of general and administrative expenses as we grow our administrative infrastructure, the continuing market acceptance of our solution, and potential acquisitions of complementary businesses, services or technologies. To the extent that existing cash and cash from operations are not sufficient to fund our future activities, we may need to raise additional funds. If we make acquisitions of complementary businesses, services or technologies, we could be required to seek additional equity financing or utilize our cash resources.

Depending on certain growth opportunities, we may choose to accelerate investments in sales and marketing, research and development, which may require the use of proceeds from our initial public offering for such additional expansion and expenditures.

The following table sets forth a summary of our cash flows for the periods indicated (in thousands):

	Six Months Ended June 30,
	2013			2012
Net cash provided by operating activities	$	6,219		$	4,086
Net cash provided by (used in) investing activities		3,836			(28,640	)
Net cash provided by financing activities		1,659			94,389
Effect of foreign exchange rate changes on cash and equivalents		(81	)		(37	)
Net increase in cash and equivalents		11,633			69,798

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Net cash provided by operating activities. Cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business, the increase in the number of customers using our on-demand software and services and the amount and timing of customer payments. Cash provided by operations has historically resulted from net income attributable to sales of subscriptions to our on-demand software and services and adjusted for non-cash expense items such as depreciation and amortization of property and equipment and stock-based compensation. Our cash flows from operating activities are affected by the seasonality of our business, which results in variations in the timing of, our invoicing of, and our receipt of payments from, our customers. We have generally experienced increased invoicing in the fourth quarter of each year mainly due to billings associated with revenue realized from subscription overage fees. As a result, we have also experienced increased levels of customer payments during the first quarter of each year, related to the customer receipts from fourth quarter invoices. We expect this seasonality and resulting trends in cash flows from operating activities to continue.

Our cash provided by operating activities during the six months ended June 30, 2013 was primarily due to our net loss of $16.4 million, adjusted for $9.9 million in non-cash expenses that included $2.2 million of depreciation and amortization, $7.3 million in stock-based compensation, and $0.3 million of the amortization of premiums on marketable securities. Working capital sources of cash included a $10.7 million increase in deferred revenue due to more customers on our platform in 2013 and a $4.4 million increase in accrued expenses due to a higher level of expenses consistent with the overall growth of our business. These sources of cash were partially offset by $1.0 million decrease in accounts receivable as we collected receivables recognized and invoiced for overage fees in the fourth quarter of 2012 during the first quarter of 2013, $0.8 million decrease in accounts payable and a $0.5 million increase in prepaid expenses and other assets.

Our cash provided by operating activities during the six months ended June 30, 2012 was primarily due to our net loss of $7.9 million, adjusted for $4.9 million in non-cash expenses that included $1.5 million of depreciation and amortization, $2.6 million in stock-based compensation, $0.4 million of expense due to the change in the fair market value of our warrant and $0.2 million of deferred rent expense. Working capital sources of cash included a $4.4 million increase in deferred revenue due to more customers on our platform in 2012, a $1.1 million increase in accounts payable and accrued expenses due to a higher level of expenses consistent with the overall growth of our business, a $0.1 million decrease in other long-term assets, and a $2.3 million decrease in accounts receivable as we collected receivables recognized and invoiced for overage fees in the fourth quarter of 2011 during the first quarter of 2012, and also experienced a reduction in the average collection period for our receivables during the six months ended June 30, 2012. These sources of cash were partially offset by a $0.9 million increase in prepaids and other assets.

Net cash provided by (used in) investing activities. Our primary investing activities have consisted of capital expenditures to purchase computer equipment and furniture and fixtures in support of expanding our infrastructure and workforce. As our business grows, we expect our capital expenditures and our investment activity to continue to increase. Since our initial public offering, we have also invested in marketable securities.

For the six months ended June 30, 2013, cash provided by investing activities was $3.8 million, comprised primarily of $38.6 million of marketable securities that matured in the first half of 2013. This cash inflow was offset by $30.6 million for purchases of marketable securities and $4.0 million for purchases of property and equipment. In general, our purchases of property and equipment are primarily for data center equipment and network infrastructure to support our customer base, as well as equipment for supporting our increasing employee headcount.

For the six months ended June 30, 2012, cash used in investing activities was $28.6 million, comprised primarily of $25.3 million for purchases of marketable securities, and $3.2 million for purchases of property and equipment. In general, our purchases of property and equipment are primarily for data center equipment and network infrastructure to support our customer base, as well as equipment for supporting our increasing employee headcount.

Net cash provided by financing activities. Our primary financing activities have consisted of capital raised to fund our operations as well as proceeds from and payments on equipment debt obligations entered into to finance our property and equipment, primarily equipment used in our data centers. As our business grows, we expect to continue to finance our capital expenditures through equipment debt vehicles.

For the six months ended June 30, 2013, cash provided by financing activities was $1.7 million, primarily consisted of $1.6 million in proceeds from the exercise of stock options and $2.0 million in proceeds from a note payable in connection with the financing of property and equipment, partially offset by $1.9 million in payments in connection with our equipment debt and software financing obligations.

For the six months ended June 30, 2012, cash provided by financing activities primarily consisted of $94.1 million of proceeds from our IPO, net of underwriting discounts and commissions but before offering expenses. In addition, cash provided by financing activities consisted of $0.4 million in proceeds from the exercise of stock options and $2.6 million in proceeds from a note payable in connection with the financing of property and equipment, partially offset by $1.3 million in payments in connection with our equipment debt obligations as well as $1.5 million in legal and audit fees associated with filing our registration statement.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange and inflation risks, as well as risks relating to changes in the general economic conditions in the countries where we conduct business. To reduce certain of these risks, we monitor the financial condition of our large customers and limit credit exposure by collecting fees in advance and setting credit limits as we deem appropriate. In addition, our investment strategy currently has been to invest in financial instruments that are highly liquid and readily convertible into cash and that mature within three months from the date of purchase. We have invested $58.8 million in money market funds, certificates of deposit, and municipal securities with an average maturity of 48 days, classified as cash equivalents, and have invested $40.0 million in U.S. government debt securities, municipal securities and corporate debt securities, classified as available-for-sale securities, with maturities ranging between four and twelve months as of June 30, 2013. To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We have also not used, nor do we intend to use, derivatives for trading or speculative purposes.

Interest Rate Risk

We are exposed to market risk related to changes in interest rates. Our cash and cash equivalents and marketable securities consist of cash, money market funds, certificates of deposit, U.S. government debt securities, municipal securities and corporate debt securities. At June 30, 2013, we had cash and cash equivalents of $70.5 million. The carrying amount of our cash equivalents reasonably approximates fair value, due to the short maturities of these instruments.

The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. At June 30, 2013, we had marketable securities, classified as available-for-sale securities, of $40.0 million. Our investments in marketable securities consist of high-grade U.S. government debt securities, certificates of deposit, municipal securities and corporate debt securities with maturities of less than one year. Investments purchased with the remaining maturity of 90 days or less are considered to be cash equivalents. We classify all of our investments as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in a separate component of stockholder’s equity. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, however, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. We therefore do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

We do not believe our cash equivalents have significant risk of default or illiquidity. While we believe our cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits. We cannot be assured that we will not experience losses on these deposits.

At June 30, 2013, we had borrowings outstanding with principal amounts of $6.1 million. Our outstanding long-term borrowings consist of fixed interest rate financial instruments. The interest rate of our fixed rate borrowings ranges between 3.75% and 5.40%. The carrying amount of these long-term borrowings approximates fair value based on borrowing rates currently available to us. A hypothetical 10% increase or decrease in interest rates relative to interest rates at June 30, 2013 would not have a material impact on the fair values of all of our outstanding borrowings.

Foreign Currency Exchange Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. Dollar. Our customer contracts are generally denominated in the currencies of the countries in which the customer is located. Our historical revenue has been denominated in U.S. Dollars, the Euro and British pound sterling. An immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts receivable at June 30, 2013 would have a 4.3% adverse impact on our total accounts receivable balance at June 30, 2013. Our operating expenses are generally denominated in the currencies of the countries in which our operations are located, primarily the United States and, to a much lesser extent, the United Kingdom, France and Germany. More than one quarter of our employees are employed outside of the United States. Increases and decreases in our foreign denominated revenue from movements in foreign exchange rates are partially offset by the corresponding decreases or increases in our foreign-denominated operating expenses.

As our international operations grow, our risks associated with fluctuation in currency rates will become greater, and we will continue to assess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. Dollar can increase the costs of our international expansion. To date, we have not entered into any foreign currency hedging contracts although we may do so in the future.

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Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, 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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures 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 ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date.

Changes in Internal Controls

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to various legal proceedings that arise in the normal course of our business activities. In addition, from time to time, third parties may assert intellectual property infringement claims against us in the form of letters and other forms of communication. As of the date of this Quarterly Report on Form 10-Q, we are not a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our results of operations, prospects, cash flows, financial position or brand.

Item 1A. Risk Factors

The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Please see page 10 of this Quarterly Report on Form 10-Q for a discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the events or circumstances described in the following risk factors actually occurs, our business, operating results and financial condition could be materially adversely affected.

Risks Related to Our Business and Our Industry

We have had a history of losses, and we may be unable to achieve or sustain profitability.

We have experienced net losses in each year since our inception, except for the year ended December 31, 2010. We experienced a net loss of $8.5 million and $16.4 million for the three and six months ended June 30, 2013, respectively. At June 30, 2013, our accumulated deficit was $93.1 million and total stockholders’ equity was $87.0 million. We cannot predict if we will achieve sustained profitability in the near future or at all. We expect to incur operating losses as a result of expenses associated with the continued development and expansion of our business. Our expenses include sales and marketing, research and development and other costs relating to the development, marketing and sale of our solution and services that may not generate revenue until later periods, if at all. Any failure to increase revenue or manage our cost structure as we implement initiatives to grow our business could prevent us from achieving or sustaining profitability. In addition, our ability to achieve profitability is subject to a number of the risks and uncertainties discussed below, many of which are beyond our control. We cannot be certain that we will be able to achieve or sustain profitability on a quarterly or annual basis.

Our limited operating history makes it difficult to evaluate our current business and future prospects.

We have been in existence since 2004, and much of our growth has occurred in recent periods. Our limited operating history may make it difficult for you to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increasing and unforeseen expenses as we continue to grow our business. If we do not manage these risks successfully, our business will be harmed.

We depend on a limited number of customers for a substantial portion of our revenue. The loss of a key customer could significantly reduce our revenue.

We have derived, and we believe that we will continue to derive, a substantial portion of our revenue from a limited number of customers. For example, for the three and six months ended June 30, 2013, our largest ten customers by revenue accounted for an aggregate of approximately 31% and 30% of our revenue, respectively. If we were to lose one or more of our key customers, there is no assurance that we would be able to replace such customers with new customers that generate comparable revenue, which would materially adversely affect our financial condition and results of operations. Our operating results for the foreseeable future will continue to depend on our ability to sell our digital commerce solutions to a limited number of prospective customers. Any revenue growth will depend on our success in growing our customers’ online revenue processed on our platform and expanding our customer base to include additional customers.

Fluctuations in the exchange rate of foreign currencies could result in currency transactions losses.

We currently have foreign sales denominated in Euros, British pound sterling, Australian and Canadian dollars and may, in the future, have sales denominated in other foreign currencies. In addition, we incur a portion of our operating expenses in Euros, British pound sterling and, to a lesser extent, other foreign currencies. Any fluctuation in the exchange rate of these foreign currencies may negatively impact our business, financial condition and operating results. We have not previously engaged in foreign currency hedging. If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets.

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The seasonality of our business creates significant variance in our quarterly revenue.

Our customers are retailers and branded manufacturers that typically realize a significant portion of their online sales in the fourth quarter of each year, specifically during the holiday season. As a result of this seasonal variation, our subscription revenue fluctuates, with additional fees in excess of committed annual levels, called overage fees, being higher in the fourth quarter than in other quarters and with revenue generally declining in the first quarter sequentially from the fourth quarter.

We recognize revenue from customer subscriptions over the term of the subscription agreement and, therefore, a significant downturn in our business may not be immediately reflected in our operating results.

We recognize revenue from subscription agreements monthly over the terms of these agreements, which is typically three years. As a result, a significant portion of the revenue we report in each quarter is generated from customer agreements entered into during previous periods. Consequently, a decline in new or renewed subscriptions in any one quarter may not impact our financial performance in that quarter, but might negatively affect our revenue in future quarters. If a number of contracts are not renewed in the same quarter, our revenue may decline significantly in that quarter and subsequent quarters. In addition, we may be unable to adjust our fixed costs in response to reduced revenue. Accordingly, the effect of significant declines in sales and market acceptance of our solutions may not be reflected in our short-term results of operations.

Our business is substantially dependent upon the continued growth of the market for on-demand software solutions.

We derive, and expect to continue to derive, substantially all of our revenue from the sale of our cloud based digital commerce solutions. As a result, widespread acceptance and use of the on-demand business model is critical to our future growth and success. Under the perpetual or periodic license model for software procurement, users of the software would typically run the applications on their hardware. Because many companies are generally predisposed to maintaining control of their information technology, or IT, systems and infrastructure, there may be resistance to the concept of accessing software functionality as a service provided by a third party. In addition, the market for on-demand software solutions is still evolving, and competitive dynamics may cause pricing levels to change, as the market matures and as existing and new market participants introduce new types of solutions and different approaches to enable organizations to address their digital commerce needs. As a result, we may be forced to reduce the prices we charge for our solutions and may be unable to renew existing customer agreements or enter into new customer agreements at the same prices and upon the same terms that we have historically. If the market for on-demand software solutions fails to grow, grows more slowly than we currently anticipate or evolves and forces us to reduce the prices we charge for our solutions, demand for our solutions and our revenue, gross margin and other operating results could be materially adversely affected.

We rely on a variable pricing model and any change in that model could adversely affect our financial results.

We have adopted a variable pricing model whereby we participate in a share of our customers’ gross revenue processed on our platform. This pricing model aligns our interests with those of our customers and reflects the need for us to expand our own processing and support infrastructure as activity on our customers’ digital commerce sites increases. All of our customer contracts are based on a variable pricing model. If customers were to demand a fixed pricing model that did not provide for variability based on their level of usage of our platform, our financial results could be adversely affected.

Our lengthy sales and implementation cycles make it difficult to predict our future revenue and causes variability in our operating results.

Our sales cycle can vary substantially from customer to customer, but typically requires six to nine months depending on the size and complexity of the opportunity. From the time a new contract is signed, approximately six months are typically required to implement and launch a digital commerce site for a new customer. A number of factors influence the length and variability of our sales and implementation cycles, including, for example:

• the need to educate potential customers about the uses and benefits of our solutions;

• the relatively long duration of the commitment customers make in their agreements with us;

• the discretionary nature of potential customers’ purchasing and budget cycles and decisions;

• the competitive nature of potential customers’ evaluation and purchasing processes;

• evolving digital commerce needs and functionality demands of potential customers;

• announcements or planned introductions of new products by us or our competitors;

• lengthy purchasing approval processes of potential customers;

• the complexity of the implementations; and

• system integrators implementing the majority of our new customers.

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Lengthy sales and implementation cycles make it difficult to predict the quarter in which revenue from a new customer may first be recognized. We may incur significant sales and marketing expenses in anticipation of selling our products, and if we do not achieve the level of revenue we expected, our operating results will suffer and our stock price may decline. Further, our potential customers frequently need to obtain approvals from multiple decision makers before making purchase decisions. Delays in our sales or implementation cycles could cause significant variability in our revenue and operating results for any particular period.

If we are unable to retain our existing customers, our revenue and results of operations would be adversely affected.

We sell our solutions pursuant to agreements that are generally three years in duration. Our customers have no obligation to renew their subscriptions after their subscription period expires, and these subscriptions may not be renewed on the same or on more profitable terms. As a result, our ability to grow depends in part on subscription renewals. We may not be able to accurately predict future trends in customer renewals, and our customers’ renewal rates may decline or fluctuate because of several factors, including their satisfaction or dissatisfaction with our services, the cost of our services and the cost of services offered by our competitors or reductions in our customers’ spending levels. If our customers do not renew their subscriptions for our services, renew on less favorable terms or do not purchase additional functionality or subscriptions, our revenue may grow more slowly than expected or decline, and our profitability and gross margins may be harmed.

Security and privacy breaches may hurt our business.

Any security breaches, unauthorized access, unauthorized usage, virus or similar breach or disruption could result in loss of confidential information, damage to our reputation, early termination of our contracts, litigation, regulatory investigations or other liabilities. If our, our customers’ or our partners’ security measures are breached as a result of third-party action, employee error, malfeasance or otherwise and, as a result, someone obtains unauthorized access to customer data, our reputation will be damaged, our business may suffer and we could incur significant liability.

Techniques used to obtain unauthorized access or to sabotage systems change frequently and 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. If an actual or perceived security breach occurs, the market perception of our security measures could be harmed and we could lose sales and customers. Any significant violations of data privacy could result in the loss of business, litigation and regulatory investigations and penalties that could damage our reputation and adversely impact our results of operations and financial condition. Moreover, if a high profile security breach occurs with respect to another software-as-a-service, or SaaS, provider, our customers and potential customers may lose trust in the security of the SaaS business model generally, which could adversely impact our ability to retain existing customers or attract new ones.

Our business and operations have experienced rapid growth and organizational change in recent periods, which has placed, and may continue to place, significant demands on our management and infrastructure. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.

Our growth has placed, and may continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. We intend to further expand our overall business, customer base, headcount and operations both domestically and internationally, with no assurance that our business or revenue will continue to grow. Creating a global organization and managing a geographically dispersed workforce will require substantial management effort, the allocation of valuable management resources and significant additional investment in our infrastructure. We will be required to continue to improve our operational, financial and management controls and our reporting procedures and we may not be able to do so effectively. As such, we may be unable to manage our expenses effectively in the future, which may negatively impact our gross margins or operating expenses in any particular quarter. If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, the quality of our solutions may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers.

Failure to effectively maintain and expand our direct sales teams and develop and expand our indirect sales channel will impede our growth.

We will need to continue to expand our sales and marketing infrastructure in order to grow our customer base and our business. Identifying, recruiting and training these sales and marketing personnel will require significant time, expense and attention. Our business will be seriously harmed and our financial resources will be wasted if our efforts to expand our direct and indirect sales channels do not generate a corresponding increase in revenue. In particular, if we are unable to hire, develop and retain talented sales personnel or if our new direct sales personnel are unable to achieve expected productivity levels in a reasonable period of time, we may not be able to significantly increase our revenue and grow our business.

The global recession and related credit crisis may continue to adversely affect our business and results of operations.

The United States and other global economies have experienced a recession that has affected all sectors of the economy, resulting in declines in economic growth and consumer confidence, increases in unemployment rates and uncertainty about economic stability. Global credit and financial markets have also experienced extreme disruptions, including diminished liquidity and credit availability and rapid fluctuations in market valuations. Our business has been affected by these conditions, and there is no certainty that economic conditions will not deteriorate further. These uncertainties may affect our business in a number of ways, making it difficult to accurately forecast and plan our future business activities. Weak economic conditions may lead consumers and retailers to postpone spending, which may cause our customers to decrease or delay their purchases of our solutions. In addition, the inability of consumers

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to obtain credit could negatively affect our revenue. Financial difficulties experienced by third parties with whom we have entered relationships and upon whom we depend in order to grow our business could detract from the quality or timeliness of the products or professional services they provide to us, which could adversely affect our reputation and relationships with our customers.

If the current uncertain economic conditions continue or further deteriorate, we could be required to record charges relating to restructuring costs or the impairment of assets, and our business and results of operations could be materially adversely affected.

We are dependent upon consumers’ willingness to use the internet for commerce.

Our success depends upon the general public’s continued willingness to use the internet as a means to purchase goods, communicate, and conduct and research commercial transactions. If consumers became unwilling or less willing to use the internet for commerce for any reason, including lack of access to high-speed communications equipment, congestion of traffic on the internet, internet outages or delays, disruptions or other damage to users’ computers, increases in the cost of accessing the internet and security and privacy risks or the perception of such risks, our business could be materially adversely affected.

Even if demand for digital commerce products and services increases generally, there is no guarantee that demand for SaaS solutions like ours will increase to a corresponding degree.

For our customers and potential customers to be willing to invest in our digital commerce solutions, the internet must continue to be accepted and widely used for commerce and communication. If digital commerce does not grow or grows more slowly than expected, then our future revenue and profits may not meet our expectations or those of analysts. The widespread adoption of our solutions depends not only on strong demand for digital commerce products and services generally, but also for products and services delivered via a SaaS business model in particular. Many companies continue to rely primarily or exclusively on traditional means of commerce that are not internet-based and may be reluctant to change their patterns of commerce. Even if such companies do adopt digital commerce solutions, it is unclear whether they will desire digital commerce solutions like ours. As a result, we cannot assure you that our SaaS digital commerce solutions will achieve and sustain the high level of market acceptance that is critical for the future success of our business.

If we fail to manage our SaaS hosting network infrastructure capacity, our existing customers may experience service outages and our new customers may experience delays in the deployment of our digital commerce solutions.

We have experienced significant growth in the number of users, transactions and data that our hosting infrastructure supports. We seek to maintain sufficient excess capacity in our SaaS hosting network infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. However, the provision of new hosting infrastructure requires significant lead time. If we do not accurately predict our infrastructure capacity requirements, particularly in the fourth quarter when we might experience significant increases in traffic on our customers’ digital commerce sites, our customers could experience service outages that may subject us to financial penalties and financial liabilities and result in customer losses. If our hosting infrastructure capacity fails to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity, which could harm our reputation and adversely affect our revenue growth.

If we fail to develop our brand cost-effectively, our business may suffer.

We believe that developing and maintaining awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our existing and future solutions and is an important element in attracting new customers. Furthermore, we believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable and useful services at competitive prices. In the past, our efforts to build our brand have involved significant expenses. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business could suffer.

We may not be able to compete successfully against current and future competitors.

We face intense competition in the market for digital commerce applications and services, and we expect competition to intensify in the future. We have competitors with longer operating histories, larger customer bases and greater financial, technical, marketing and other resources than we do. Increased competition may result in reduced pricing for our solutions, longer sales cycles or a decrease of our market share, any of which could negatively affect our revenue and future operating results and our ability to grow our business.

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A number of competitive factors could cause us to lose potential sales or to sell our solutions at lower prices or at reduced margins, including, among others:

• Potential customers may choose to develop digital commerce applications in-house, rather than paying for our solutions;

• Some of our current and potential competitors have greater financial, marketing and technical resources than we do, allowing them to leverage a larger installed customer base and distribution network, adopt more aggressive pricing policies and offer more attractive sales terms, adapt more quickly to new technologies and changes in customer requirements, and devote greater resources to the promotion and sale of their products and services than we can;

• Current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to enhance their products and expand their markets, and consolidation in our industry is likely to intensify. Accordingly, new competitors or alliances among competitors may emerge and rapidly acquire significant market share;

• Current and potential competitors may offer software that addresses one, or a limited number, of digital commerce functions at a lower price point or with greater depth than our solutions; and

• Software vendors could bundle digital commerce solutions or offer such products at a lower price as part of a larger product sale.

We cannot assure you that we will be able to compete successfully against current and future competitors. In addition, competition may intensify as our competitors enter into business combinations or alliances or raise additional capital and as established companies in other market segments or geographic markets expand into our market segments or geographic markets. If we cannot compete successfully against our competitors, our business, results of operations and financial condition could be negatively impacted.

Mergers of or other strategic transactions by our competitors or our customers could weaken our competitive position or reduce our revenue.

If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. Our competitors may also establish or strengthen cooperative relationships with our current or future strategic distributors, systems integrators, third-party consulting firms or other parties with whom we have relationships, thereby limiting our ability to promote our solutions and limiting the number of consultants available to implement our solutions. In addition, we may lose customers that merge with or are acquired by companies using a competitor’s or an internally developed solution. Disruptions in our business caused by these events could reduce our revenue.

The 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, or 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 the expected growth in the SaaS or e-commerce 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 is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties.

Our growth depends in part on the success of our strategic relationships with third parties.

We anticipate that we will continue to depend on various third-party relationships in order to grow our business. In addition to growing our indirect sales channels, we intend to pursue additional relationships with other third parties, such as technology and content providers and implementation consultants. Identifying, negotiating and documenting relationships with third parties require significant time and resources as does integrating third-party content and technology. Some of the third parties that sell our solutions have the direct contractual relationships with our ultimate end-user customers, and therefore we risk the loss of such customers if the third parties fail to perform their obligations. Our agreements with distributors and providers of technology, content and consulting services are typically non-exclusive, do not prohibit them from working with our competitors or from offering competing services and may not have minimum purchase commitments. Our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to our solutions. In addition, these distributors and providers may not perform as expected under our agreements, and we have had, and may in the future have, disagreements or disputes with such distributors and providers, which could negatively affect our brand and reputation. A global economic slowdown could also adversely affect the businesses of our distributors, and it is possible that they may not be able to devote the resources we expect to the relationship.

If we are unsuccessful in establishing or maintaining our relationships with these third parties, specifically with eCommera, NETRADA and PFSweb, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results would suffer. Even if we are successful, we cannot assure you that these relationships will result in improved operating results.

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We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.

In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights. Companies providing internet-related products and services are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights. These risks have been amplified by the increase in third parties, which we refer to as non-practicing entities, whose sole primary business is to assert such claims. We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce our rights or are sued by a third party that claims that our technology infringes its rights, the litigation could be expensive and could divert our management resources.

In addition, in most instances, we have agreed to indemnify our customers against certain claims that our products infringe the intellectual property rights of third parties. We have received indemnification requests from many customers that have received letters from, or been sued by, non-practicing entities claiming infringement of patents owned by them. Most of those underlying claims, and the extent, if any, of our indemnification obligations, have not yet been resolved. Some of these patents are the subject of pending legal proceedings between the patent owners and one or more major companies engaged in digital commerce, and the outcome of those proceedings could affect the extent to which the patent owners seek to prosecute claims against us or our customers. Also, because the patent owners have asserted the same patents against multiple customers, an adverse resolution in the case of one customer could lead to adverse resolutions in the cases of other customers and such claims could potentially lead to greater exposure for us than for any single customer. Our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligations to them. The results of any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:

• cease selling or using products or services that incorporate the challenged intellectual property;

• make substantial payments for legal fees, settlement payments or other costs or damages;

• obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology; or

• redesign those products or services to avoid infringement.

If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us or any obligation to indemnify our customers for such claims, such payments or costs could have a material adverse effect upon our business and financial results.

We could incur substantial costs in protecting our intellectual property from infringement, and any failure to protect our intellectual property could impair our business.

We seek to protect the source code for our proprietary software under a combination of patent, copyright and trade secrets law. However, because we make some of the source code available to some customers, third parties may be more likely to misappropriate it. Our policy is to enter into confidentiality agreements with our employees, consultants, vendors and customers and to control access to our software, documentation and other proprietary information. Despite these precautions, it may be possible for someone to copy our software or other proprietary information without authorization or to develop similar software independently.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our software exists, we expect software piracy to be a persistent problem. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Such litigation could be costly, time-consuming and distracting to management, result in a diversion of resources, the impairment or loss of portions of our intellectual property and have a material adverse effect on our business, operating results and financial condition. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. These steps may be inadequate to protect our intellectual property. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our licensed products may be unenforceable under the laws of certain jurisdictions and foreign countries. Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying and use of our products and proprietary information may increase.

There can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology. If we fail to meaningfully protect our intellectual property, then our business, brand, operating results and financial condition could be materially harmed.

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If our software products contain serious errors or defects, then we may lose revenue and market acceptance and may incur costs to defend or settle product liability claims.

Complex software applications such as ours often contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Despite internal testing and testing by our customers, our current and future products may contain serious defects, which could result in lost revenue or a delay in market acceptance.

Since our customers use our products for critical business applications, such as e-commerce, errors, defects or other performance problems could result in damage to our customers. They could seek significant compensation from us for the losses they suffer. Although our customer agreements typically contain provisions designed to limit our exposure to product liability claims, existing or future laws or unfavorable judicial decisions could negate these limitations. Even if not successful, a product liability claim brought against us would likely be time-consuming and costly and could seriously damage our reputation in the marketplace, making it harder for us to sell our products.

Government and industry regulation of the internet is evolving and could directly restrict our business or indirectly affect our business by limiting the growth of digital commerce. Unfavorable changes in government regulation or our failure to comply with regulations could harm our business and operating results.

As digital commerce evolves, federal, state and foreign agencies have adopted and could in the future adopt regulations covering issues such as user privacy, content, and taxation of products and services. Government regulations could limit the market for our products and services or impose burdensome requirements that render our business unprofitable. Our digital commerce solutions enable our customers to collect, manage and store a wide range of consumer data. The United States and various state governments have adopted or proposed limitations on the collection, distribution and use of personal information. Several foreign jurisdictions, including the European Union and the United Kingdom, have adopted legislation (including directives or regulations) that increase or change the requirements governing data collection and storage in these jurisdictions. If our privacy or data security measures fail to comply with current or future laws and regulations, we may be subject to litigation, regulatory investigations or other liabilities, or our customers may terminate their relationships with us.

In addition, although many regulations might not apply to our business directly, we expect that laws regulating the solicitation, collection or processing of personal and consumer information could affect our customers’ ability to use and share data, potentially reducing demand for our services. The Telecommunications Act of 1996 prohibits certain types of information and content from being transmitted over the internet. The prohibition’s scope and the liability associated with a violation are currently unsettled. In addition, although substantial portions of the Communications Decency Act were held to be unconstitutional, we cannot be certain that similar legislation will not be enacted and upheld in the future. It is possible that legislation could expose companies involved in digital commerce to liability, which could limit the growth of digital commerce generally. Legislation like the Telecommunications Act and the Communications Decency Act could dampen the growth in web usage and decrease its acceptance as a medium of communications and commerce. Moreover, if future laws and regulations limit our customers’ ability to use and share consumer data or our ability to store, process and share data with our customers over the internet, demand for our solutions could decrease, our costs could increase, and our results of operations and financial condition could be harmed.

In addition, taxation of services provided over the internet or other charges imposed by government agencies or by private organizations for accessing the internet may also be imposed. Any regulation imposing greater fees for internet use or restricting information exchange over the internet could result in a decline in the use of the internet and the viability of internet-based services, which could harm our business and operating results.

We use a limited number of data centers to deliver our services. Any disruption of service at these facilities could harm our business.

We manage our services and serve all of our customers from a limited number of third-party data center facilities. While we engineer and architect the actual computer and storage systems upon which our platform runs, which we call our grid computing points of delivery, or PODs, and deploy them to the data center facilities, we do not control the operation of these facilities.

The owners of our data facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transfer to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.

Any changes in third-party service levels at our data centers or any errors, defects, disruptions or other performance problems with our services could harm our reputation and may damage our customers’ businesses. Interruptions in our services might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, and cause customers to terminate their subscriptions or harm our renewal rates.

Our data centers are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. At least one of our data facilities is located in an area known for seismic activity, increasing our susceptibility to the risk that an earthquake could significantly harm the operations of these facilities. The occurrence of a natural disaster or an act of terrorism, or vandalism or other misconduct, a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in our services.

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We may not be able to respond to rapid technological changes with new solutions, which could have a material adverse effect on our sales and profitability.

The on-demand digital commerce market is characterized by rapid technological change, frequent new product and service introductions and evolving industry standards. Our ability to attract new customers and increase revenue from existing customers will depend in large part on our ability to enhance and improve our existing solutions, introduce new solutions and sell into new industry markets. To achieve market acceptance for our solutions, we must effectively anticipate and offer solutions that meet changing customer demands in a timely manner. Customers may require features and capabilities that our current solutions do not have. If we fail to develop solutions that satisfy customer preferences in a timely and cost-effective manner, our ability to renew our contracts with existing customers and our ability to create or increase demand for our solutions will be harmed.

We may experience difficulties with software development, industry standards, design, manufacturing or marketing that could delay or prevent our development, introduction or implementation of new solutions and enhancements. The introduction of new solutions by competitors, the emergence of new industry standards or the development of entirely new technologies to replace existing offerings could render our existing or future solutions obsolete.

If we are unable to successfully develop or acquire new digital commerce capabilities and functionality, enhance our existing solutions to anticipate and meet customer preferences or sell our solutions into new markets, our revenue and results of operations would be adversely affected.

Our long-term success depends, in part, on our ability to expand the sales of our digital commerce solutions to customers located outside of the United States, and thus our business is susceptible to risks associated with international sales and operations.

We currently maintain offices and/or have sales personnel in Germany, France, Denmark, the Netherlands, the United Kingdom and China, and we intend to expand our international operations. Any international expansion efforts that we may undertake may not be successful. In addition, conducting international operations in new markets subjects us to new risks that we have not generally faced in the United States. These risks include:

• localization of our solutions, including translation into foreign languages and adaptation for local practices and regulatory requirements;

• lack of familiarity and burdens of complying with foreign laws, legal standards, regulatory requirements, tariffs, and other barriers;

• unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;

• difficulties in managing systems integrators and technology partners;

• differing technology standards;

• longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

• difficulties in managing and staffing international operations and differing employer/employee relationships;

• fluctuations in exchange rates that may increase the volatility of our foreign based revenue;

• potentially adverse tax consequences, including the complexities of foreign value added tax (or other tax) systems and restrictions on the repatriation of earnings;

• uncertain political and economic climates; and

• reduced or varied protection for intellectual property rights in some countries.

These factors may cause our international costs of doing business to exceed our comparable domestic costs. Operating in international markets also requires significant management attention and financial resources. Any negative impact from our international business efforts could negatively impact our business, results of operations and financial condition as a whole.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in full compliance with applicable laws.

Our solutions are subject to export controls, including the Commerce Department’s Export Administration Regulations and various economic and trade sanctions regulations established by the Treasury Department’s Office of Foreign Assets Controls, and exports of our solutions must be made in compliance with these laws. If we fail to comply with these U.S. export control laws and import laws, including U.S. customs regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. In addition, if our distributors fail to obtain

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appropriate import, export or re-export licenses or authorizations, we may also be adversely affected through reputational harm and penalties. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. Furthermore, the U.S. export control laws and economic sanctions laws prohibit the shipment of certain products and services to U.S. embargoed or sanctioned countries, governments and persons. Even though we take precautions to prevent our solutions from being shipped or provided to U.S. sanctions targets, our solutions and services could be shipped to those targets or provided by our distributors despite such precautions. Any such shipment could have negative consequences, including government investigations, penalties and reputational harm. In addition, various countries regulate the import of certain encryption technology, including through import permitting/licensing requirements, and have enacted laws that could limit our ability to distribute our solutions or 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 and sale of our solutions in international markets, prevent our customers with international operations from deploying our solutions or, in some cases, prevent the export or import of our solutions to certain countries, governments or persons altogether. Any change in export or import regulations, economic sanctions or related laws, 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, 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 results of operations.

Our use of “open source” software could negatively affect our ability to sell our services and subject us to possible litigation.

A portion of the technologies licensed by us incorporate so-called “open source” software, and we may incorporate open source software in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses. If we fail to comply with these licenses, we may be subject to certain conditions, including requirements that we offer our solutions that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and/or that we license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contained the open source software and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of our solutions. In addition, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our products.

We rely on third-party software, including server software and licenses from third parties to use patented intellectual property that is required for the development of our solutions, which may be difficult to obtain or which could cause errors or failures of our solutions.

We rely on software licensed from or hosted by third parties to offer our solutions. In addition, we may need to obtain future licenses from third parties to use intellectual property associated with the development of our solutions, which might not be available to us on acceptable terms, or at all. Any loss of the right to use any software required for the development and maintenance of our solutions could result in delays in the provision of our solutions until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. Any errors or defects in third-party software could result in errors or a failure of our solutions which could harm our business.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. We are in the process of reviewing and improving our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which will require annual management assessment of the effectiveness of our internal control over financial reporting and, as part of that documentation and testing, identifying areas for further attention and improvement. We continue recruiting additional finance and accounting personnel with certain skill sets that we need as a public company.

Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our service to new and existing customers.

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We may expand by acquiring or investing in other companies, which may divert our management’s attention, result in additional dilution to our stockholders and consume resources that are necessary to sustain our business.

Our business strategy may include acquiring complementary services, technologies or businesses and we may engage in negotiations for such acquisitions from time to time. We also may enter into relationships with other businesses to expand our service offerings or our ability to provide service in foreign jurisdictions, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies. Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions may often be subject to conditions or approvals that are beyond our control. Consequently, these transactions, even if undertaken and announced, may not close.

An acquisition, investment or new business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, products, personnel or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, the company’s software is not easily adapted to work with ours or we have difficulty retaining the customers of any acquired business due to changes in management or otherwise. Acquisitions may also disrupt our business, divert our resources and require significant management attention that would otherwise be available for development of our business. Moreover, the anticipated benefits of any acquisition, investment or business relationship may not be realized or we may be exposed to unknown liabilities. For one or more of those transactions, we may:

• issue additional equity securities that would dilute our stockholders;

• use cash that we may need in the future to operate our business;

• incur debt on terms unfavorable to us or that we are unable to repay;

• incur large charges or substantial liabilities;

• encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; and

• become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.

Any of these risks could harm our business and operating results.

The loss of key personnel or an inability to attract and retain highly skilled personnel may impair our ability to grow our business.

We are highly dependent upon the continued service and performance of our senior management team and key technical and sales personnel, such as our president and chief executive officer, our chief financial officer, our chief operating officer and our chief technology officer. These key employees may terminate employment with us at any time with no advance notice. The replacement of these officers likely would involve significant time and costs, and the loss of these officers may significantly delay or prevent the achievement of our business objectives.

We face intense competition for qualified individuals from numerous technology, software and manufacturing companies. For example, our competitors may be able to attract and retain a more qualified engineering team by offering more competitive compensation packages. If we are unable to attract new engineers and retain our current engineers, we may not be able to develop and maintain our services at the same levels as our competitors and we may, therefore, lose potential customers and sales penetration in certain markets. Our failure to attract and retain suitably qualified individuals could have an adverse effect on our ability to implement our business plan and, as a result, our ability to compete would decrease, our operating results would suffer and our revenue would decrease. In addition, if any of our key employees joins a competitor or decides to otherwise compete with us, we may experience a material disruption of our operations and development plans, which may cause us to lose customers or increase operating expenses as the attention of our remaining senior managers is diverted to recruit replacements for the departed key employees.

Because we recognize costs of services as they are incurred and we recognize related services revenue for subscriptions and services sold in a single arrangement ratably, our gross margins may not be indicative of trends in our services business, which increases the difficulty of evaluating our future financial results.

When we sell subscriptions and services in a single arrangement, which is sometimes referred to as a multiple-element arrangement, we recognize the services revenue ratably over the longer of the related subscription term or the estimated expected life of just over six years. We continue to evaluate the length of the estimated expected life of our customer relationships as we gain more experience with customer renewals. Future changes in the estimated expected life of our customer relationship periods could result in the recognition of services revenue over a longer or shorter period of time than previously planned, making it difficult to forecast future results. Costs associated with providing these services are recognized as incurred, resulting in variability in our gross margins when costs and revenue are recorded in different periods.

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Our investment portfolio may become impaired by deterioration of the capital markets.

Our cash equivalent and short-term investment portfolio as of June 30, 2013 consisted of corporate bonds and commercial paper, money market mutual funds, municipal securities, certificates of deposit, U.S. agency securities and U.S. Treasury securities. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes. Should financial market conditions worsen in the future, investments in some financial instruments may pose risks arising from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of June 30, 2013, we had no material impairment charges associated with our short-term investment portfolio, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.

Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations.

A change in accounting standards or practices could have a significant effect on our reported results and may affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

Risks Related to Tax Matters

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.

As a multinational organization, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and results of operations. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on us and the results of our operations.

Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability.

We conduct operations world-wide through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between our subsidiaries. If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally will require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneous documentation is maintained to support the transfer prices. While we believe that we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities. If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arms’ length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher tax liability to us. In addition, if the country from which the income is reallocated does not agree with the reallocation, both countries could tax the same income, resulting in double taxation. If tax authorities were to allocate income to a higher tax jurisdiction, subject our income to double taxation or assess interest and penalties, it would increase our consolidated tax liability, which could adversely affect our financial condition, results of operations and cash flows.

Our ability to use net operating loss carryforwards to reduce future tax payments may be limited if we experience a change in ownership, or if taxable income does not reach sufficient levels.

Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We may experience ownership changes in the future and subsequent shifts in our stock ownership. As a result, we may be limited in the portion of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. Federal income tax purposes.

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Risks Related To Our Common Stock

An active trading market for our common stock may not be sustained, and the trading price of our common stock may be volatile.

Our shares of common stock began trading on the New York Stock Exchange on March 15, 2012. Given the limited trading history of our common stock, there is a risk that an active trading market for our common stock will not be sustained, which could put downward pressure on the market price of our common stock and thereby affect the ability of our stockholders to sell their shares. In addition, the trading price of our common stock has at times been volatile and could continue to be subject to significant fluctuations in response to various factors, some of which are beyond our control. Since our initial public offering, our common stock has traded between $49.11 per share and $21.35 per share. In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the companies operating in such markets. The market price of our common stock may be similarly volatile, and investors in our common stock may experience a decrease in the value of their shares, including as a result of factors unrelated to our operating performance and prospects. The price of our common stock could be subject to wide fluctuations in response to a number of factors, including:

• our operating performance and the performance of other similar companies;

• the overall performance of the equity markets;

• developments with respect to intellectual property rights;

• publication of unfavorable research reports about us or our industry or withdrawal of research coverage by securities analysts;

• speculation in the press or investment community;

• the size of our public float;

• natural disasters or terrorist acts;

• announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments; and

• global economic, legal and regulatory factors unrelated to our performance.

Failure to meet market expectations for our financial performance would likely adversely affect the market price of our stock.

The public trading of our stock is based in large part on market expectations that our business will continue to grow and that we will achieve certain levels of financial performance. If our operating results or guidance fall below the expectations of research analysts or investors, the price of our common stock could decline substantially. Fluctuations in our operating results or guidance may be due to a number of factors, including, but not limited to, those listed below:

• factors affecting our existing customers’ gross revenue processed on our platform;

• the extent to which our existing customers renew their subscriptions for our solutions and the timing and terms of those renewals;

• the extent to which existing customers deploy or discontinue use of additional digital commerce sites on our platform;

• the extent to which new customers are attracted to our solutions to satisfy their digital commerce needs;

• the timing, committed subscription levels and revenue share rates at which we enter into agreements for our solutions with new customers;

• the addition or loss of large customers, including through acquisitions or consolidations;

• the number and size of new customers and the number and size of renewal customers in a particular period;

• the mix of customers across small, mid-sized and large organizations;

• changes in our pricing policies or those of our competitors;

• the financial condition and creditworthiness of our customers;

• the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure;

• the timing and success of new solutions introduced by us;

• the timing and success of current and new products and services introduced by our competitors;

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• other changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;

• the timing of expenses related to the development of new products and technologies, including enhancements to our solutions;

• our ability to manage our existing business and future growth, including increases in the number of customers on our platform, additional customer digital commerce sites and new geographic regions;

• expenses related to our data centers and the expansion of such data centers;

• various factors related to disruptions in our SaaS hosting network infrastructure, defects in our solutions, privacy and data security and exchange rate fluctuations, each of which is described elsewhere in these risk factors;

• our ability to efficiently and cost effectively deploy new customer digital commerce sites on our platform; and

• general economic, industry and market conditions.

If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, or if they publish negative evaluations of our stock, the price of our stock and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes incorrect or unfavorable research about our business, our stock price could decline. In addition, if one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.

We incur significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the New York Stock Exchange. Our management team is adapting to the requirements of being a public company. If these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, prospects, financial condition and operating results. In addition, complying with these rules and regulations has substantially increased our legal and financial compliance expenses, has made some activities more time-consuming and costly, and may in the future require us to reduce costs in other areas of our business or increase the prices of our solution, which could negatively impact our business.

Our principal stockholders have a controlling influence over our business affairs and may make business decisions with which our stockholders disagree and which may adversely affect the value of our stockholders’ investment.

As of July 16, 2013, our executive officers, directors and their affiliates beneficially owned or controlled, directly or indirectly, 11,937,158 shares of common stock in the aggregate (including shares of common stock subject to options exercisable within 60 days of July 16, 2013), or approximately 37% of our outstanding shares. As a result, if some of stockholders act together, they will have the ability to significantly influence matters submitted to our stockholders for approval, including the election and removal of directors, amendments to our certificate of incorporation and bylaws and the approval of any business combination. These actions may be taken even if they are opposed by other stockholders. This concentration of ownership may also have the effect of delaying or preventing a change of control of our company or discouraging others from making tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares.

The issuance of additional stock in connection with acquisitions, our stock incentive plans, warrants or otherwise will dilute all other stockholdings.

Our certificate of incorporation authorizes us to issue up to 240,000,000 shares of common stock and up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue all of these shares that are not already outstanding without any action or approval by our stockholders. We intend to continue to evaluate strategic acquisitions in the future. We may pay for such acquisitions, partly or in full, through the issuance of additional equity. Any issuance of shares by us in connection with acquisitions, the exercise of stock options or warrants, the vesting of restricted stock units or otherwise would dilute the percentage ownership held by existing investors.

We do not expect to declare any dividends in the foreseeable future.

We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. In addition, our existing credit facilities prohibit us from paying cash dividends, and any future financing agreements may prohibit us from paying any type of dividends. Consequently, investors may need to sell all or part of their holdings of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.

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Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company.

Our certificate of incorporation, bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our certificate of incorporation and bylaws include provisions:

• establishing a classified board of directors with staggered three-year terms so that not all members of our board are elected at one time;

• providing that directors may be removed by stockholders only for cause;

• limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

• requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

• authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; and

• limiting the liability of, and providing indemnification to, our directors and officers.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock. Any provision of our amended and restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

To the extent that our pre-tax income or loss is relatively small, our ability to conclude that a control deficiency is not a material weakness or that an accounting error does not require a restatement could be adversely affected.

Under the Sarbanes-Oxley Act of 2002, our management is required to assess the impact of control deficiencies based upon both quantitative and qualitative factors, and depending upon that analysis we classify such identified deficiencies as either a control deficiency, significant deficiency or a material weakness. One element of our analysis of the significance of any control deficiency is its actual or potential financial impact. This assessment will vary depending on our level of pre-tax income or loss. For example, a smaller pre-tax income or loss will increase the likelihood of a quantitative assessment of a control deficiency as a significant deficiency or material weakness. To the extent that our pre-tax income or loss is relatively small, if management or our independent registered public accountants identify an error in our interim or annual financial statements, it is more likely that such an error may be determined to be a material weakness or be considered a material error that could, depending upon the complete quantitative and qualitative analysis, result in our having to restate previously issued financial statements.

Risks Related to Reduced Reporting Requirements

We are an “emerging growth company” and may elect to comply with reduced public company reporting requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, 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 continue to be an emerging growth company until the earliest of (1) the last day of the fiscal year during which we had total annual gross revenues of $1 billion or more (as indexed for inflation in the manner set forth in the JOBS Act), (2) the last day of the fiscal year following the fifth anniversary of the date of our IPO, (3) the date on which we issued more than $1 billion in non-convertible debt in the previous three-year period, or (4) the date on which we became a large accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. 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.

33

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Recent Sales of Unregistered Securities

None.

(b) Use of Proceeds

Our initial public offering of common stock was effected through a registration statement on Form S-1 (File No. 333-175595), which was declared effective by the SEC on March 14, 2012. We received aggregate net proceeds from the offering of approximately $94.1 million, after deducting underwriting discounts and commissions, or approximately $91.0 million after the payment of $3.1 million of other offering expenses payable by us.

There has been no material change in the use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b).

(c) Purchases of Equity Securities By Us and Affiliated Purchasers

None.

Item 6. Exhibits

See the Exhibit Index immediately following the signature page of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DEMANDWARE, INC.
Date: August 9, 2013		By:	/s/ Scott J. Dussault
			Scott J. Dussault
			Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Signatory)

35

EXHIBIT INDEX

Exhibit No.	Description
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2	Certification of Principal Financial Officer pursuant Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Label Linkbase Document.
101.PRE*	XBRL Taxonomy Presentation Linkbase Document.

* Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2013 and December 31, 2012, (ii) Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2013 and June 30, 2012, (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and June 30, 2012, and (iv) Notes to Consolidated Financial Statements.

In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act, is deemed not filed for purposes of section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

36

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Thomas D. Ebling, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Demandware, 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) 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) 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 (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2013	/s/ Thomas D. Ebling
	Thomas D. Ebling
	President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Scott J. Dussault, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Demandware, 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) 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) 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 (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2013	/s/ Scott J. Dussault
	Scott J. Dussault
	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Demandware, Inc. (the “Company”) for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Thomas D. Ebling, President, Chief Executive Officer and Director of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that, to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2013	/s/ Thomas D. Ebling
	Thomas D. Ebling
	President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Demandware, Inc. (the “Company”) for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Scott J. Dussault, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that, to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2013	/s/ Scott J. Dussault
	Scott J. Dussault
	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities at June 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements Using
	Amounts at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At June 30, 2013
Assets—Cash Equivalents:
Money market funds	$	51,961	$	51,961	$	—	$	—
Certificates of deposit		499		—		499		—
Municipal securities		6,377		—		6,377		—
Assets—Short-Term Investments:
U.S. government agency bonds	$	2,210	$	—	$	2,210	$	—
Corporate bonds and commercial paper		6,193		—		6,193		—
Municipal securities		21,190		—		21,190		—
Certificates of deposit		10,379		—		10,379		—
At December 31, 2012
Assets—Cash Equivalents:
Money market funds	$	48,089	$	48,089	$	—	$	—
Certificates of deposit		1,933		—		1,933		—
Municipal securities		2,070		—		2,070		—
Assets—Short-Term Investments:
U.S. government agency bonds	$	16,719	$	—	$	16,719	$	—
Corporate bonds and commercial paper		15,398		—		15,398		—
Municipal securities		7,419		—		7,419		—
Certificates of deposit		8,715		—		8,715		—

XML

Condensed Consolidated Statements of Comprehensive Loss (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenue:
Subscription	$ 20,806	$ 15,198	$ 39,711	$ 28,811
Services	2,401	3,162	4,010	5,639
Total revenue	23,207	18,360	43,721	34,450
Cost of revenue:
Subscription	4,080	3,040	8,044	5,906
Services	2,462	3,055	4,980	5,608
Total cost of revenue	6,542	6,095	13,024	11,514
Gross profit	16,665	12,265	30,697	22,936
Operating expenses:
Sales and marketing	14,180	9,568	25,556	15,906
Research and development	5,377	4,084	10,117	7,555
General and administrative	5,521	3,696	10,754	6,401
Total operating expenses	25,078	17,348	46,427	29,862
Loss from operations	(8,413)	(5,083)	(15,730)	(6,926)
Other income (expense):
Interest income	55	46	117	47
Interest expense	(68)	(79)	(147)	(153)
Other income (expense)	116	(447)	(303)	(649)
Other income (expense), net	103	(480)	(333)	(755)
Loss before income taxes	(8,310)	(5,563)	(16,063)	(7,681)
Income tax expense	145	70	364	196
Net loss	(8,455)	(5,633)	(16,427)	(7,877)
Accretion of redeemable convertible preferred stock				(1,172)
Net loss attributable to common stockholders	(8,455)	(5,633)	(16,427)	(9,049)
Net loss per share attributable to common stockholders, basic and diluted	$ (0.28)	$ (0.19)	$ (0.55)	$ (0.49)
Weighted average common shares outstanding, basic and diluted	30,266	29,068	30,113	18,598
Net loss	(8,455)	(5,633)	(16,427)	(7,877)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	21	(42)	(36)	(21)
Unrealized loss on marketable securities	(10)	(6)	(20)	(6)
Comprehensive loss	$ (8,444)	$ (5,681)	$ (16,483)	$ (7,904)

XML

Debt

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Debt

5. DEBT

Equipment Notes Payable—The Company’s loan and security agreement (the “2008 Loan Agreement”) was amended in May 2009 to include a $2.0 million equipment line of credit (the “Loan”). Borrowings under the Loan could be made for eligible equipment purchases through December 31, 2009. The Loan was again amended in April 2010, June 2011, June 2012 and June 2013, which increased the available borrowings by an additional $4.0 million, $4.0 million, $3.0 million and $3.0 million, respectively. Each advance under the Loan is payable in 36 equal monthly payments of principal plus accrued interest, at an annual rate of 3.75%. The last payment on the Loan is due June 1, 2016. The 2008 Loan Agreement is secured by substantially all of the Company’s assets, except its intellectual property.

At June 30, 2013 and December 31, 2012, the outstanding balance under the Loan was $4.7 million and $4.1 million, respectively. As of June 30, 2013, the Company had $1.6 million of available borrowings under the Loan for eligible equipment purchases through April 30, 2014.

Software Financing—In May 2012, the Company entered into a $1.8 million agreement to finance the purchase of a perpetual software license and the related first year technical support (the “Software Finance Agreement”). The Software Finance Agreement is secured by the financed assets. The financed amount is due in 12 equal quarterly payments of principal plus accrued interest, at an annual rate of 5.40% through April 1, 2015. In May 2013, the Company renewed the related technical support for a second year, increasing the financed amount by $0.5 million. At June 30, 2013 and December 31, 2012, the outstanding balance under the Software Finance Agreement was $1.4 million and $1.3 million, respectively.

XML

Debt - Additional Information (Detail) (USD $) In Millions, unless otherwise specified			1 Months Ended				6 Months Ended		1 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Equipment Line of Credit [Member]	Jun. 30, 2012 Equipment Line of Credit [Member]	Jun. 30, 2011 Equipment Line of Credit [Member]	Apr. 30, 2010 Equipment Line of Credit [Member]	Jun. 30, 2013 Equipment Line of Credit [Member]	May 30, 2009 Equipment Line of Credit [Member]	May 31, 2012 Software Finance Agreement [Member]	Jun. 30, 2013 Software Finance Agreement [Member]	Dec. 31, 2012 Software Finance Agreement [Member]
Debt Instrument [Line Items]
Equipment line of credit								$ 2.0
Increase in available equipment line of credit borrowings			3.0	3.0	4.0	4.0
Initial drawdown of loan due in equal monthly payments							36
Annual interest rate							3.75%		5.40%
Outstanding balance under the Software Finance Agreement	4.7	4.1								1.4	1.3
Available borrowings under the Loan for eligible equipment purchases	1.6
Purchase of software license									1.8
Frequency of payments									12 equal quarterly payments
Agreement Expiration Date									Apr. 01, 2015
Increased Financed amount									$ 0.5

XML

Stock-Based Awards (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Options Outstanding

The following table summarizes information related to stock options outstanding as of June 30, 2013 (in thousands, except per share and term information):

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Exercisable—June 30, 2013		2,234	$	5.82		6.77	$	81,724
Options vested and expected to vest—June 30, 2013		3,556		10.99		7.33		111,737

Stock-Based Compensation Expense

The following table presents stock-based compensation expense included in the Company’s consolidated statements of comprehensive income (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of subscription revenue	$	95	$	56	$	210	$	62
Cost of service revenue		233		230		615		259
Sales and marketing		979		589		2,075		678
Research and development		822		505		1,735		550
General and administration		1,229		854		2,709		1,064
Total	$	3,358	$	2,234	$	7,344	$	2,613

XML

Stock-Based Awards - Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation cost	$ 3,358	$ 2,234	$ 7,344	$ 2,613
Cost of Subscription Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation cost	95	56	210	62
Cost of Services Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation cost	233	230	615	259
Sales and Marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation cost	979	589	2,075	678
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation cost	822	505	1,735	550
General and Administration [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation cost	$ 1,229	$ 854	$ 2,709	$ 1,064

XML

Stock-Based Awards - Summary of Stock Options Outstanding (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Exercisable, Shares	2,234
Options vested and expected to vest, Shares	3,556
Exercisable, Weighted-Average Exercise Price	$ 5.82
Options vested and expected to vest, Weighted-Average Exercise Price	$ 10.99
Exercisable, Weighted-Average Remaining Contractual Life (in Years)	6 years 9 months 7 days
Options vested and expected to vest, Weighted-Average Remaining Contractual Life (in Years)	7 years 3 months 29 days
Exercisable, Aggregate Intrinsic Value	$ 81,724
Options vested and expected to vest, Aggregate Intrinsic Value	$ 111,737

XML

Stock-Based Awards - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation cost	$ 3,358,000	$ 2,234,000	$ 7,344,000	$ 2,613,000
Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation vesting period			4 years
Stock options grant expiration period			10 years
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average period			3 years
Stock-based compensation cost	1,900,000	900,000	4,100,000	900,000
Unrecognized compensation expense	26,000,000		26,000,000
Restricted Stock Awards [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation vesting period			2 years
Restricted Stock Awards [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation vesting period			4 years
Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense	$ 15,200,000		$ 15,200,000
Weighted average period			3 years

XML

Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Organization and Summary of Significant Accounting Policies

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Overview—Demandware, Inc. (the “Company”) provides cloud-based digital commerce solutions that enable companies to easily design, implement and manage their own customized digital commerce sites, including websites, mobile applications and other digital storefronts. The Company’s digital commerce platform, Demandware Commerce, enables customers to establish and execute complex digital commerce strategies that include global expansion, multi-brand rollouts and omni-channel operations. The Company’s customers use its highly scalable and integrated Demandware Commerce platform to create a seamless brand experience for consumers across all digital touch points worldwide.

The Company sells subscriptions to its on-demand software and related services through a direct sales force and indirect channels. The Company’s customers consist of retailers and branded manufacturers that operate principally in the following vertical markets: apparel and footwear, health and beauty, home and garden, sporting goods and general merchandise.

The Company’s headquarters are located in Burlington, Massachusetts. At June 30, 2013, the Company had seven subsidiaries: Demandware Securities Corporation, Demandware GmbH, Demandware UK Limited, Demandware SARL and Demandware Hong Kong Limited, each of which is wholly owned by the Company, and Demandware E-Commerce (Shanghai) Limited and Demandware Australia Pty Limited, each of which is a wholly owned subsidiary of Demandware Hong Kong Limited.

Initial Public Offering—In March 2012, the Company closed its initial public offering (“IPO”) of 6,325,000 shares of common stock, including 825,000 shares sold pursuant to the underwriters’ option to purchase additional shares, at an offering price of $16.00 per share. The Company’s common stock is traded on the New York Stock Exchange under the symbol “DWRE”. The Company received proceeds from the IPO of $94.1 million, net of underwriting discounts and commissions, but before offering expenses of $3.1 million.

Basis of Presentation and Significant Accounting Policies—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission ( “SEC”), and on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2012. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional information relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. Interim results are not necessarily indicative of the results for any other interim period or for the entire year.

At December 31, 2012, the Company reassessed the estimated expected life of its customers and estimated it to be slightly greater than six years. Previously, the Company’s estimated expected customer life ranged from three to six years. This change in accounting estimate affected the amortization of setup fees and service implementation revenue, decreasing subscription and services revenue by $0.1 million and $0.4 million, respectively, for the three months ended June 30, 2013, and by $0.2 million and $0.8 million, respectively, for the six months ended June 30, 2013. As a result, the Company’s loss from operations, net loss and net loss per share increased by $0.5 million, $0.5 million and $0.02, respectively, for the three months ended June 30, 2013, and by $1.0 million, $1.0 million and $0.03, respectively, for the six months ended June 30, 2013.

The condensed consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 8, 2013.

Recent Accounting Pronouncements—On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of a Liability for an Unrecognized Tax Benefit When a Net Operating Loss or Tax Credit Carryforward Exists.” This accounting update requires that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward or other tax credit carryforward when settlement in this manner is available under applicable tax law. This guidance is effective for the Company’s interim and annual periods beginning January 1, 2014. The Company does not believe the adoption of this guidance will have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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Cash Equivalents and Short-Term Investments

6 Months Ended

Jun. 30, 2013

Cash And Cash Equivalents [Abstract]

Cash Equivalents and Short-Term Investments

3. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

A summary of the Company’s cash equivalents and short-term investments at June 30, 2013 is as follows (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash Equivalents:
Money market funds	$	51,961	$	—	$	—		$	51,961
Certificates of deposit		499		—		—			499
Municipal securities		6,376		1		—			6,377
Total	$	58,836	$	1	$	—		$	58,837
Short-Term Investments:
U.S. government agency bonds	$	2,210	$	—	$	—		$	2,210
Corporate bonds and commercial paper		6,194		—		(1	)		6,193
Municipal securities		21,196		5		(11	)		21,190
Certificates of deposit		10,379		—		—			10,379
Total	$	39,979	$	5	$	(12	)	$	39,972

A summary of the Company’s cash equivalents and short-term investments at December 31, 2012 is as follows (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash Equivalents:
Money market funds	$	48,089	$	—	$	—		$	48,089
Certificates of deposit		1,933		—		—			1,933
Municipal securities		2,070		—		—			2,070
Total	$	52,092	$	—	$	—		$	52,092
Short-Term Investments:
U.S. government agency bonds	$	16,714	$	5	$	—		$	16,719
Corporate bonds and commercial paper		15,397		2		(1	)		15,398
Municipal securities		7,412		7		—			7,419
Certificates of deposit		8,714		1		—			8,715
Total	$	48,237	$	15	$	(1	)	$	48,251

The contractual maturity dates for the Company’s available-for-sale investments that are classified as short-term investments in the consolidated balance sheets are one year or less from the respective balance sheet dates.

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Contingencies

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Contingencies

6. CONTINGENCIES

Litigation—In the ordinary course of business, the Company is involved in litigation incidental to its business, certain of which includes speculative claims for substantial or indeterminate amounts of damages. The Company records a liability when it believes that a loss is both probable and reasonably estimable. On a quarterly basis, the Company reviews each of its legal proceedings to determine whether it is probable, reasonably possible or remote that a liability has been incurred and, if it is at least reasonably possible, whether a range of loss can be reasonably estimated. Significant judgment is required to determine both the likelihood of there being a loss and the estimated amount of a loss. The Company’s management is not aware of any pending legal proceeding or other loss contingency, whether asserted or unasserted, affecting the Company for which it might become liable or the outcome of which management expects to have a material impact on the Company. However, the outcome of legal matters is inherently unpredictable and subject to significant uncertainties.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. FAIR VALUE MEASUREMENTS

Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: observable inputs such as quoted prices in active markets (Level 1); inputs other than the quoted prices in active markets that are observable either directly or indirectly (Level 2); and unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions (Level 3). This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value, including the Company’s cash equivalents.

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities at June 30, 2013 and December 31, 2012 (in thousands):

			Fair Value Measurements Using
	Amounts at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At June 30, 2013
Assets—Cash Equivalents:
Money market funds	$	51,961	$	51,961	$	—	$	—
Certificates of deposit		499		—		499		—
Municipal securities		6,377		—		6,377		—
Assets—Short-Term Investments:
U.S. government agency bonds	$	2,210	$	—	$	2,210	$	—
Corporate bonds and commercial paper		6,193		—		6,193		—
Municipal securities		21,190		—		21,190		—
Certificates of deposit		10,379		—		10,379		—
At December 31, 2012
Assets—Cash Equivalents:
Money market funds	$	48,089	$	48,089	$	—	$	—
Certificates of deposit		1,933		—		1,933		—
Municipal securities		2,070		—		2,070		—
Assets—Short-Term Investments:
U.S. government agency bonds	$	16,719	$	—	$	16,719	$	—
Corporate bonds and commercial paper		15,398		—		15,398		—
Municipal securities		7,419		—		7,419		—
Certificates of deposit		8,715		—		8,715		—

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. If market prices are not available, the fair value measurement is based on models that use primarily market based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

The valuation technique used to measure fair value for the Company’s Level 1 and Level 2 assets and liabilities is a market approach that uses prices and other relevant information generated by market transactions involving identical or comparable assets. As of June 30, 2013 and December 31, 2012, the Company did not carry any Level 3 assets or liabilities.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts and credit memos	$ 820	$ 630
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	240,000	240,000
Common stock, shares issued	30,516	29,842
Common stock, shares outstanding	30,516	29,842

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Organization and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Significant Accounting Policies—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission ( “SEC”), and on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the fiscal year ended December 31, 2012. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for the interim periods reported and of the Company’s financial condition as of the date of the interim balance sheet. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional information relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. Operating results for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, for any other interim period or for any other future year.

At December 31, 2012, the Company reassessed the estimated expected life of its customers, and estimated it to be just over six years. Previously, the Company’s estimated expected customer life ranged from three to six years. This change in accounting estimate affected the amortization of setup fees and service implementation revenue, decreasing subscription and services revenue by $0.1 million and $0.4 million, respectively, for the three months ended June 30, 2013, and by $0.2 million and $0.8 million, respectively, for the six months ended June 30, 2013. As a result, the Company’s loss from operations, net loss and net loss per share increased by $0.5 million, $0.5 million and $0.02, respectively, for the three months ended June 30, 2013, and by $1.0 million, $1.0 million and $0.03, respectively, for the six months ended June 30, 2013.

The condensed consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 8, 2013.

Recent Accounting Pronouncements

Recent Accounting Pronouncements—On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of a Liability for an Unrecognized Tax Benefit When a Net Operating Loss or Tax Credit Carryforward Exists.” This accounting update requires that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward or other tax credit carryforward when settlement in this manner is available under applicable tax law. This guidance is effective for the Company’s interim and annual periods beginning January 1, 2014. The Company does not believe the adoption of this guidance will have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (16,427)	$ (7,877)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	2,195	1,540
Re-measurement of preferred stock warrant liability		426
Bad debt expense	53
Stock-based compensation	7,344	2,613
Deferred rent expense	(9)	238
Other non-cash reconciling items	310	28
Changes in operating assets and liabilities:
Accounts receivable	(1,027)	2,335
Prepaid expenses and other current assets	(463)	(874)
Other long term assets	(41)	104
Accounts payable	(789)	867
Accrued expenses	4,414	275
Deferred revenue	10,659	4,411
Net cash provided by operating activities	6,219	4,086
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(3,970)	(3,156)
Purchase of marketable securities	(30,649)	(25,319)
Sale and maturity of marketable securities	38,609
Increase in restricted cash and other assets	(154)	(165)
Net cash provided by (used in) investing activities	3,836	(28,640)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net of underwriting discounts and commissions		94,116
Proceeds from exercise of stock options	1,561	403
Deferred offering costs		(1,465)
Proceeds from issuance of notes payable	1,997	2,600
Payments of equipment notes	(1,432)	(1,265)
Payments of software financing agreement	(467)
Net cash provided by financing activities	1,659	94,389
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS	(81)	(37)
INCREASE IN CASH AND CASH EQUIVALENTS	11,633	69,798
CASH AND CASH EQUIVALENTS-Beginning of period	58,877	14,939
CASH AND CASH EQUIVALENTS-End of period	70,510	84,737
SUPPLEMENTARY INFORMATION:
Interest paid	202	130
Income taxes paid	214	154
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of redeemable convertible preferred stock to common stock		88,775
Conversion of preferred stock warrant to common stock warrant		533
Deferred offering costs included in accounts payable and accrued expenses		140
Purchase of property and equipment included in accounts payable and accrued expenses	71	111
Software license acquired by assuming directly related liabilities		1,212
Software license technical support acquired by assuming directly related liabilities	$ 561	$ 549

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 70,510	$ 58,877
Short-term investments	39,972	48,251
Accounts receivable-net of allowance for doubtful accounts and credit memos of $820 and $630 at June 30, 2013 and December 31, 2012, respectively	20,188	19,214
Prepaid expenses and other current assets	4,450	3,452
Total current assets	135,120	129,794
Property and equipment, net	9,904	8,377
Other assets	1,355	1,157
Total assets	146,379	139,328
Current liabilities:
Current portion of notes payable	3,516	3,021
Accounts payable	2,142	3,168
Accrued expenses	12,675	8,348
Deferred revenue	18,859	11,105
Deferred rent	165	127
Total current liabilities	37,357	25,769
Long-term liabilities:
Deferred revenue	18,552	15,647
Notes payable	2,537	2,353
Deferred rent	921	969
Total liabilities	59,367	44,738
Contingencies (Note 6)
Stockholders' equity:
Preferred stock, $0.01 par value per share-10,000 shares authorized, none issued and outstanding
Common stock, $0.01 par value per share-240,000 shares authorized, 30,516 and 29,842 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively	305	298
Additional paid-in capital	179,894	170,997
Accumulated other comprehensive loss	(73)	(17)
Accumulated deficit	(93,114)	(76,688)
Total stockholders' equity	87,012	94,590
Total liabilities and stockholders' equity	$ 146,379	$ 139,328

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Fair Value Measurements - Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	$ 39,972	$ 48,251
Cash Equivalents [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents	58,837	52,092
Cash Equivalents [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents	51,961	48,089
Cash Equivalents [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents	499	1,933
Cash Equivalents [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents	6,377	2,070
Short-Term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	39,972	48,251
Short-Term Investments [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	10,379	8,715
Short-Term Investments [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	21,190	7,419
Short-Term Investments [Member] | U.S. Government Agency Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	2,210	16,719
Short-Term Investments [Member] | Corporate Bonds and Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	6,193	15,398
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Cash Equivalents [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents	51,961	48,089
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Cash Equivalents [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Cash Equivalents [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Short-Term Investments [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Short-Term Investments [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Short-Term Investments [Member] | U.S. Government Agency Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Short-Term Investments [Member] | Corporate Bonds and Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments
Fair Value Measurements Using Significant Other Observable Inputs (Level 2) [Member] | Cash Equivalents [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents
Fair Value Measurements Using Significant Other Observable Inputs (Level 2) [Member] | Cash Equivalents [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents	499	1,933
Fair Value Measurements Using Significant Other Observable Inputs (Level 2) [Member] | Cash Equivalents [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents	6,377	2,070
Fair Value Measurements Using Significant Other Observable Inputs (Level 2) [Member] | Short-Term Investments [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	10,379	8,715
Fair Value Measurements Using Significant Other Observable Inputs (Level 2) [Member] | Short-Term Investments [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	21,190	7,419
Fair Value Measurements Using Significant Other Observable Inputs (Level 2) [Member] | Short-Term Investments [Member] | U.S. Government Agency Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	2,210	16,719
Fair Value Measurements Using Significant Other Observable Inputs (Level 2) [Member] | Short-Term Investments [Member] | Corporate Bonds and Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments	6,193	15,398
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member] | Cash Equivalents [Member] | Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member] | Cash Equivalents [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member] | Cash Equivalents [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Cash Equivalents
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member] | Short-Term Investments [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member] | Short-Term Investments [Member] | Municipal Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member] | Short-Term Investments [Member] | U.S. Government Agency Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) [Member] | Short-Term Investments [Member] | Corporate Bonds and Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets-Short-Term Investments

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

8. INCOME TAXES

The Company’s income tax provisions for the three and sixth months then ended June 30, 2013 and 2012 reflects its estimates of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events which are recorded in the period they occur. The estimates are reevaluated each quarter based on the Company’s estimated tax expense for the full fiscal year.

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Management has determined that it is more likely than not that the Company will not utilize the benefits of federal and state deferred tax assets for financial reporting purposes. Accordingly, the deferred tax assets have been fully reserved at June 30, 2013 and December 31, 2012.

The Company files federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. With few exceptions, all tax years 2004 through 2012 remain subject to examination by federal and certain state tax authorities due to the Company’s net operating loss carryforwards. The Company is subject to examination by various foreign jurisdictions for years after 2008. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance that taxing authorities will not propose adjustments that are more or less than its expected outcome. It is not expected that the amount of unrecognized tax benefits will be recognized in the next twelve months. In addition, the Company does not expect the change in uncertain tax positions to have a material impact on its financial position, results of operations or liquidity.

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Cash Equivalents and Short-Term Investments (Tables)

6 Months Ended

Jun. 30, 2013

Cash And Cash Equivalents [Abstract]

Cash Equivalents and Available-for-Sale Investments

A summary of the Company’s cash equivalents and short-term investments at June 30, 2013 is as follows (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash Equivalents:
Money market funds	$	51,961	$	—	$	—		$	51,961
Certificates of deposit		499		—		—			499
Municipal securities		6,376		1		—			6,377
Total	$	58,836	$	1	$	—		$	58,837
Short-Term Investments:
U.S. government agency bonds	$	2,210	$	—	$	—		$	2,210
Corporate bonds and commercial paper		6,194		—		(1	)		6,193
Municipal securities		21,196		5		(11	)		21,190
Certificates of deposit		10,379		—		—			10,379
Total	$	39,979	$	5	$	(12	)	$	39,972

A summary of the Company’s cash equivalents and short-term investments at December 31, 2012 is as follows (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash Equivalents:
Money market funds	$	48,089	$	—	$	—		$	48,089
Certificates of deposit		1,933		—		—			1,933
Municipal securities		2,070		—		—			2,070
Total	$	52,092	$	—	$	—		$	52,092
Short-Term Investments:
U.S. government agency bonds	$	16,714	$	5	$	—		$	16,719
Corporate bonds and commercial paper		15,397		2		(1	)		15,398
Municipal securities		7,412		7		—			7,419
Certificates of deposit		8,714		1		—			8,715
Total	$	48,237	$	15	$	(1	)	$	48,251

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Stock-Based Awards

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Awards

7. STOCK-BASED AWARDS

Stock Options—The Company’s stock options generally vest over a four-year period and expire 10 years from the date of grant. Upon the exercise of an option, the Company issues shares of common stock.

The following table summarizes information related to stock options outstanding as of June 30, 2013 (in thousands, except per share and term information):

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Exercisable—June 30, 2013		2,234	$	5.82		6.77	$	81,724
Options vested and expected to vest—June 30, 2013		3,556		10.99		7.33		111,737

Unrecognized compensation expense relating to stock options was $15.2 million at June 30, 2013, which is expected to be recognized over a weighted-average period of approximately three years.

Restricted Stock Awards—The Company’s restricted stock awards generally vest over a two- or four-year period and upon vesting, the Company issues shares of common stock. Unrecognized compensation expense relating to restricted stock awards was $26.0 million at June 30, 2013, which is expected to be recognized over a weighted-average period of approximately three years.

Stock-Based Compensation—Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the service period (generally the vesting period of the equity grant). The Company estimates forfeitures at the time of grant and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The following table presents stock-based compensation expense included in the Company’s consolidated statements of comprehensive income (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of subscription revenue	$	95	$	56	$	210	$	62
Cost of service revenue		233		230		615		259
Sales and marketing		979		589		2,075		678
Research and development		822		505		1,735		550
General and administration		1,229		854		2,709		1,064
Total	$	3,358	$	2,234	$	7,344	$	2,613

Stock-based compensation cost for the three months ended June 30, 2013 and 2012 includes $1.9 million and $0.9 million related to restricted stock, respectively. Stock-based compensation cost for the six months ended June 30, 2013 and 2012 includes $4.1 million and $0.9 million, respectively, related to restricted stock. The remaining expense for each period relates to stock options.

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Net Loss Per Share Attributable to Common Stockholders

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Net Loss Per Share Attributable to Common Stockholders

2. NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS

The following common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders because they had an anti-dilutive impact (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Options to purchase common stock		3,879		4,793		4,012		4,374
Unvested restricted stock		888		474		834		237
Warrant		—		23		—		23

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Organization and Summary of Significant Accounting Policies - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2012	Jun. 30, 2013	Jun. 30, 2013 Subsidiary	Jun. 30, 2013 Subscription revenue [Member]	Jun. 30, 2013 Subscription revenue [Member]	Jun. 30, 2013 Cost of Services Revenue [Member]	Jun. 30, 2013 Cost of Services Revenue [Member]	Dec. 31, 2012 Customer relationships [Member] Maximum [Member]
Accounting Policies [Line Items]
Number of subsidiaries owned			7
Initial public offering of common stock	6,325,000
Common stock pursuant to underwriters' option	825,000
Public offering price per share	$ 16.00
Proceeds from common stock initial public offering	$ 94.1
Offering expenses	3.1
Change in Accounting Estimate, Financial Effect								The Company reassessed the estimated expected life of its customers, and estimated it to be slightly greater than six years. Previously, the Company's estimated expected customer life ranged from three to six years
Decreasing revenue				0.1	0.2	0.4	0.8
Loss from operations		0.5	1.0
Net loss increased		$ 0.5	$ 1.0
Net loss per share		$ 0.02	$ 0.03

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Net Loss Per Share Attributable to Common Stockholders (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Shares Excluded from Computation of Diluted Net Loss Per Share Attributable to Common Stockholders

The following common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders because they had an anti-dilutive impact (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Options to purchase common stock		3,879		4,793		4,012		4,374
Unvested restricted stock		888		474		834		237
Warrant		—		23		—		23

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Cash Equivalents and Short-Term Investments - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2013
Cash And Cash Equivalents [Abstract]
Contractual maturity expiration dates	1 year

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Net Loss Per Share Attributable to Common Stockholders - Shares Excluded from Computation of Diluted Net loss Per Share Attributable to Common Stockholders (Detail) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	3,879	4,793	4,012	4,374
Unvested restricted stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities	888	474	834	237
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities		23		23

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 05, 2013
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Entity Registrant Name	DEMANDWARE INC
Entity Central Index Key	0001301031
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		30,625,832

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Cash Equivalents and Short-Term Investments - Cash Equivalents and Available-for-Sale Investments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Cash And Short Term Investments [Line Items]
Short-Term Investments - Fair Value	$ 39,972	$ 48,251
Cash Equivalents [Member]
Cash And Short Term Investments [Line Items]
Cash Equivalents - Amortized Cost	58,836	52,092
Unrealized Gains	1
Unrealized Losses
Cash Equivalents - Fair Value	58,837	52,092
Cash Equivalents [Member] | Money Market Funds [Member]
Cash And Short Term Investments [Line Items]
Cash Equivalents - Amortized Cost	51,961	48,089
Unrealized Gains
Unrealized Losses
Cash Equivalents - Fair Value	51,961	48,089
Cash Equivalents [Member] | Certificates of Deposit [Member]
Cash And Short Term Investments [Line Items]
Cash Equivalents - Amortized Cost	499	1,933
Unrealized Gains
Unrealized Losses
Cash Equivalents - Fair Value	499	1,933
Cash Equivalents [Member] | Municipal Securities [Member]
Cash And Short Term Investments [Line Items]
Cash Equivalents - Amortized Cost	6,376	2,070
Unrealized Gains	1
Unrealized Losses
Cash Equivalents - Fair Value	6,377	2,070
Short-Term Investments [Member]
Cash And Short Term Investments [Line Items]
Short-Term Investments - Amortized Cost	39,979	48,237
Unrealized Gains	5	15
Unrealized Losses	(12)	(1)
Short-Term Investments - Fair Value	39,972	48,251
Short-Term Investments [Member] | Certificates of Deposit [Member]
Cash And Short Term Investments [Line Items]
Short-Term Investments - Amortized Cost	10,379	8,714
Unrealized Gains		1
Unrealized Losses
Short-Term Investments - Fair Value	10,379	8,715
Short-Term Investments [Member] | Municipal Securities [Member]
Cash And Short Term Investments [Line Items]
Short-Term Investments - Amortized Cost	21,196	7,412
Unrealized Gains	5	7
Unrealized Losses	(11)
Short-Term Investments - Fair Value	21,190	7,419
Short-Term Investments [Member] | U.S. Government Agency Bonds [Member]
Cash And Short Term Investments [Line Items]
Short-Term Investments - Amortized Cost	2,210	16,714
Unrealized Gains		5
Unrealized Losses
Short-Term Investments - Fair Value	2,210	16,719
Short-Term Investments [Member] | Corporate Bonds and Commercial Paper [Member]
Cash And Short Term Investments [Line Items]
Short-Term Investments - Amortized Cost	6,194	15,397
Unrealized Gains		2
Unrealized Losses	(1)	(1)
Short-Term Investments - Fair Value	$ 6,193	$ 15,398