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TXTR > SEC Filings for TXTR > Form 10-Q on 8-Aug-2013All Recent SEC Filings

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Form 10-Q for TEXTURA CORP


8-Aug-2013

Quarterly Report


MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related Notes included elsewhere in this Quarterly Report on Form 10-Q and included in our final prospectus filed on June 7, 2013 (File No. 333-187745).

We use the terms "we," "us," "our" and "the Company" in this report to refer to Textura Corporation and its subsidiaries, except where the context otherwise requires or indicates. All references to years, unless otherwise noted, refer to our fiscal year, which ends on September 30. For example, a reference to ''fiscal 2013" means the 12-month period that will end on September 30, 2013. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains ''forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended (the ''Exchange Act"), relating to our operations, financial results, financial condition, business prospects, growth strategy, liquidity and other matters that are based on our current expectations, estimates, assumptions and projections. Words such as "believes," "expects," "potential," "continues," "may," "should," "seeks," "predicts," "anticipates," "intends," "projects," "estimates," "plans," "could," "designed," "should be" and other similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. For a more detailed discussion of these factors, see the information under the heading ''Risk Factors" included in our prospectus filed on June 7, 2013. We undertake no obligation to update any forward-looking statements in this Quarterly Report on Form 10-Q.

Overview
We are a leading provider of on-demand business collaboration software to the commercial construction industry. Our solutions are focused on facilitating collaboration between owners/developers, general contractors and subcontractors. Our solutions increase efficiency, enable better risk management, and provide improved visibility and control of construction activities for our clients.Our collaboration solutions offer robust functionality, data sharing and exchange capabilities, and workflow tools that support several mission?critical business processes at various stages of the construction project lifecycle:
Construction Payment Management ("CPM") enables the generation, collection, review and routing of invoices and the necessary supporting documentation and legal documents, and initiation of payment of the invoices.

            Submittal Exchange enables the collection, review and routing of
             project documents.


            GradeBeam supports the process of obtaining construction bids,
             including identifying potential bidders, issuing invitations-to-bid
             and tracking bidding intent.


            Pre-Qualification Management ("PQM") supports contractor risk
             assessment and qualification.

Greengrade facilitates the management of environmental certification.

In addition, we offer PlanSwift, a take?off and estimating solution used in preparing construction bids, and Contractor Default Claims Management, which supports the process of documenting a subcontractor default insurance claim. We derive substantially all of our revenue from fees related to the use by our clients of our software solutions. We classify our revenue into activity?driven revenue and organization?driven revenue:

            Owners/developers, general contractors and subcontractors using our
             CPM, Submittal Exchange and Greengrade solutions pay us fees that
             are dependent on the value of the construction project or contract
             and


are collected at the start of activity. In addition, owners/developers and general contractors typically pay us monthly fees that are dependent on the value and total number of projects managed using our system. We typically invoice and collect these monthly fees in advance on a six-month basis. We refer to these fees collectively as activity?driven revenue as they depend on the construction activity of our clients.

            Participants using our GradeBeam and PQM solutions pay us
             subscription fees. These fees are dependent on a number of
             characteristics of the organization, which may include size,
             complexity, type or number of users, and are typically generated on
             a subscription basis. We typically invoice and collect these
             subscription fees in advance on a twelve?month basis. We also
             receive a combination of license fees, maintenance fees,
             subscription fees and claims fees for our other solutions. We refer
             to these fees collectively as organization?driven revenue as they do
             not depend on the construction activity of our clients but rather
             the number and characteristics of the organizations using the
             solutions.

Recent Developments
In June 2013, we completed an initial public offering (the ''IPO''), in connection with which we issued 5,750 shares of common stock for proceeds of $80.2 million, net of underwriting discounts and commissions (see Note 11 to the Condensed Consolidated Financial Statements for further details).

Key Business Metrics
In addition to traditional financial measures, we regularly review the following
key metrics to evaluate our business, measure our performance, identify trends
affecting our business, formulate financial projections and make strategic
decisions. These metrics reflect the impact of the acquisition of GradeBeam in
October 2011, Submittal Exchange in November 2011 and PlanSwift in January 2013
as described in more detail in ''-Results of Operations.''
                                               Three Months Ended June 30,                Nine Months Ended June 30,
                                                 2013                 2012                  2013                 2012
                                                 (dollars in thousands,                     (dollars in thousands,
                                            except where otherwise indicated)          except where otherwise indicated)
Activity?driven revenue                  $          7,015        $       4,988      $         19,773        $      13,484
Organization?driven revenue                         2,347                  701                 4,908                1,878
Total revenue                            $          9,362        $       5,689      $         24,681        $      15,362
Activity?driven revenue:
  Number of projects added                          1,467                1,226                 3,741                2,989
Client?reported construction value added
(billions)                               $           13.6        $         8.5      $           32.3        $        25.7
Active projects during period                       5,701                4,143                 7,666                5,265
Organization?driven revenue:
Number of organizations                             8,210                4,594                 8,210                4,594
Adjusted EBITDA                          $         (3,809 )      $      (2,322 )    $         (8,760 )      $      (7,081 )
Deferred revenue balance as of the end
of period                                $         18,765        $      12,457      $         18,765        $      12,457

Activity?driven revenue
Number of projects added. This metric represents the total number of construction projects added by our clients to our CPM, Submittal Exchange and Greengrade solutions during the reporting period. Each project on our system is created by the client and represents a unit of work they have elected to manage on our system as a single project. As a result, an individual development, structure or remodeling program may result in the creation of multiple projects on our system. A project added to our system does not necessarily become active immediately. We use the number of projects added to our solutions during a reporting period to measure the success of our strategy of further penetrating the construction market with these solutions. Also, activity?driven revenue is dependent in part on the number of projects using our solutions.


Client?reported construction value added. This metric represents the total client?entered dollar value of construction projects added by our clients to our CPM, Submittal Exchange and Greengrade solutions during the reporting period. We use client?reported construction value added to measure the success of our strategy of increasing the volume of construction activity managed with these solutions. In addition, we use this metric in conjunction with number of projects added to monitor average project size. Also, activity?driven revenue is dependent in part on project size.
Active projects during period. This metric represents the number of construction projects that have been active during the reporting period on our CPM, Submittal Exchange and Greengrade solutions. Especially with our CPM solution, clients may elect to add a new project on our system before their project activity begins. Accordingly, there may be an interval between when a project is included as a new project added and when we would consider it an active project. We use active projects during period to evaluate our penetration of the construction market with these solutions, to monitor growth from period to period. Also, activity?driven revenue is dependent in part on the number of active projects on our solutions.
We derive the metrics above from a number of sources, including information entered into our solutions by our clients, our historical data and our analysis of the actions of our clients on our solutions. Clients may adjust or update previously?entered information periodically. In particular, client?reported construction value may be modified by the client during the lifetime of the project to revise initial estimates of construction value or reflect changes in the scope or cost of the project, and client?reported construction value may increase or decrease as a result. Since these metrics are based on information available at the time they are prepared, metrics may reflect updates from those previously reported for prior periods. Historically, these updates have not been significant in amount or percentage. In addition, management is unable to independently verify the construction value data entered by our clients. As a result, undue reliance on these metrics by us would carry the risk that we incorrectly evaluate our business performance or the success of our strategies as outlined above. Notwithstanding these limitations, based on our historical experience management believes that these metrics are valuable indicators of the overall progress of the business and the success of our various strategies. Organization?driven revenue
Number of organizations. This metric includes the number of organizations that are active subscribers on our GradeBeam and PQM solutions as of the end of the reporting period, as measured by the number of active subscriptions. An organization may be a single corporate entity or an operating unit within an entity. These clients pay an upfront fee for a fixed period of access. This metric also includes the number of organizations that have an active subscription or maintenance contract for our PlanSwift solution, or that have purchased a license within the period. We use this metric to measure the success of our strategy of further penetrating the construction market with these solutions. Also, our organization-driven revenue is dependent in part on the number of organizations using our solutions. Additional metrics
Adjusted EBITDA. Adjusted EBITDA represents loss before interest, taxes, depreciation and amortization, share-based compensation expense, acquisition-related expense and IPO-related expense. Adjusted EBITDA is not determined in accordance with accounting principles generally accepted in the United States (''GAAP''), and is a performance measure used by management in conjunction with traditional GAAP operating performance measures as part of the overall assessment of our performance including:
for planning purposes, including the preparation of the annual budget;
to evaluate the effectiveness of business strategies; and
as a factor when determining management's total compensation.

We believe the use of Adjusted EBITDA as an additional operating performance metric provides greater consistency for period-to-period comparisons of our operations. For our internal analysis, Adjusted EBITDA removes fluctuations caused by changes in our capital structure (interest expense) and non-cash items such as depreciation, amortization and share-based compensation. These excluded amounts in any given period may not directly correlate to the underlying performance of the business or may fluctuate significantly from period to period due to the issuance or conversion of convertible debentures, acquisitions, fully amortized tangible or intangible assets, or the timing and pricing of new share-based awards. We also believe Adjusted EBITDA is useful to investors and securities analysts in evaluating our operating performance as it provides them an additional tool to compare business performance across companies and periods.

Adjusted EBITDA is not a measurement under GAAP and should not be considered an alternative to net loss or as an alternative to cash flows from operating activities. The Adjusted EBITDA measurement has limitations as an analytical tool and the method of calculation may vary from company to company.


The following table presents a reconciliation from the most directly comparable

GAAP measure, net loss, to
Adjusted EBITDA:
                                          Three Months Ended June 30,           Nine Months Ended June 30,
                                            2013                2012               2013              2012
                                                (in thousands)                        (in thousands)
Net loss                              $      (20,363 )     $     (4,782 )    $     (31,301 )     $   (14,294 )
Net interest expense                           2,018                560              4,495             1,634
Income tax provision                             142                  -                226                 -
Depreciation and amortization                  1,294              1,055              3,167             3,018
EBITDA                                       (16,909 )           (3,167 )          (23,413 )          (9,642 )
Share?based compensation expense              10,089                723             11,228             2,078
Acquisition?related expense                        -                 91                414               483
IPO-related expense *                          3,011                  -              3,011                 -
Adjusted EBITDA                       $       (3,809 )     $     (2,353 )    $      (8,760 )     $    (7,081 )

* IPO-related expense for the three and nine months ended June 30, 2013 represents one-time cash bonuses of $3.0 million paid to long-tenured employees in connection with the IPO. Deferred revenue balance. Our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue as of the end of a reporting period. Our deferred revenue balance consists of activity?driven and organization?driven revenue that is recognized ratably over the estimated life of a project or contractual service period. We monitor our deferred revenue balance because it represents a significant portion of revenue to be recognized in future periods.


Results of Operations
The following tables set forth our results of operations for the periods
presented and as a percentage of our revenues for those periods. The
period-to-period comparison of financial results is not necessarily indicative
of future results.
                                                      Three Months Ended June 30,           Nine Months Ended June 30,
                                                        2013                2012               2013              2012
                                                            (in thousands)                        (in thousands)
Revenues                                          $        9,362       $      5,689      $      24,681       $   15,362
Operating expenses:
Cost of services                                           4,754              1,573              8,222            4,361
General and administrative                                 8,808              2,789             17,074            8,180
Sales and marketing                                        5,433              1,653              9,535            4,162
Technology and development                                 7,358              2,888             13,703            8,433
Depreciation and amortization                              1,294              1,055              3,167            3,018
Total operating expenses                                  27,647              9,958             51,701           28,154
Loss from operations                                     (18,285 )          (4,269)           (27,020)         (12,792)
Other expense, net                                        (1,936 )              (513)             (4,055)         (1,502)
Loss before income taxes                                 (20,221 )          (4,782)           (31,075)         (14,294)
Income tax provision                                         142                  -                226                -
Net loss                                                 (20,363 )          (4,782)           (31,301)         (14,294)
Less: Net loss attributable to non-controlling
interests                                                   (886 )            (858)            (2,643)          (1,966)
Net loss attributable to Textura Corporation             (19,477 )          (3,924)           (28,658)         (12,328)
Accretion of redeemable Series A-1 preferred
stock                                                      2,310                151              3,549              656
Accretion of redeemable non?controlling interest              75                  -                222                -
Dividends on Series A-2 preferred stock                       95                120                335              360
Beneficial conversion of Series A-2 preferred
stock                                                      7,161                  -              7,161                -
Net loss available to Textura Corporation common
stockholders                                      $      (29,118 )     $     (4,195 )    $     (39,925 )     $  (13,344 )



                                                Three Months Ended June 30,         Nine Months Ended June 30,
                                                    2013              2012             2013              2012
Revenues                                            100.0  %          100.0  %         100.0  %          100.0  %
Operating expenses:
Cost of services                                     50.8  %           27.6  %          33.3  %           28.4  %
General and administrative                           94.1  %           49.0  %          69.2  %           53.2  %
Sales and marketing                                  58.0  %           29.1  %          38.6  %           27.1  %
Technology and development                           78.6  %           50.8  %          55.5  %           54.9  %
Depreciation and amortization                        13.8  %           18.5  %          12.8  %           19.6  %
Total operating expenses                            295.3  %          175.0  %         209.5  %          183.3  %
Loss from operations                               (195.3 )%          (75.0 )%        (109.5 )%          (83.3 )%
Other expense, net                                  (20.7 )%           (9.0 )%         (16.4 )%           (9.8 )%
Loss before taxes                                  (216.0 )%          (84.1 )%        (125.9 )%          (93.0 )%
Income tax provision                                  1.5  %              -  %           0.9  %              -  %
Net loss                                           (217.5 )%          (84.1 )%        (126.8 )%          (93.0 )%


Operating Metrics
                                 Three Months Ended June 30,                      Nine Months Ended June 30,
                                    2013             2012        % Change          2013               2012         % Change
                                (dollars in thousands, except                    (dollars in thousands, except
                                  where otherwise indicated)                      where otherwise indicated)
Activity?driven revenue         $     7,015      $     4,988         40.6 %    $    19,773      $       13,484        46.6 %
Organization?driven revenue           2,347              701        234.8 %          4,908               1,878       161.3 %
Total revenue                   $     9,362      $     5,689         64.6 %    $    24,681      $       15,362        60.7 %
Activity?driven revenue:
Number of projects added              1,467            1,226         19.7 %          3,741               2,989        25.2 %
Client?reported construction
value added (billions)          $      13.6      $       8.5         60.0 %    $      32.3      $         25.7        25.7 %
Active projects during period         5,701            4,143         37.6 %          7,666               5,265        45.6 %
Organization?driven revenue:
Number of organizations               8,210            4,594         78.7 %          8,210               4,594        78.7 %

Activity?driven revenue. Activity?driven revenue increased $2.0 million, or 40.6%, in the three months ended June 30, 2013 as compared to the three months ended June 30, 2012. The increase was primarily due to a 19.7% increase in the number of projects added to our solutions, a 37.6% increase in the number of active projects during the period, and a 60.0% increase in client?reported construction value added.
Activity?driven revenue increased $6.3 million, or 46.6%, in the nine months ended June 30, 2013 as compared to the nine months ended June 30, 2012. The increase was primarily due to a 25.2% increase in the number of projects added to our solutions, a 45.6% increase in the number of active projects during the period, and a 25.7% increase in client?reported construction value added. Organization?driven revenue. Organization?driven revenue increased $1.6 million, or 234.8%, in the three months ended June 30, 2013 as compared to the three months ended June 30, 2012, and $3.0 million, or 161.3%, in the nine months ended June 30, 2013 as compared to the nine months ended June 30, 2012. Our PlanSwift solution, which we acquired in the second quarter of fiscal 2013, generated revenue of $1.5 million and $2.5 million, respectively, and increased the number of organizations by 1,408 and 3,081, respectively, in the three and nine months ended June 30, 2013. The remainder of the increase was primarily due to an increase in the number of organizations using our GradeBeam and PQM solutions.

Cost of services
                                  Three Months Ended June 30,                       Nine Months Ended June 30,
                                    2013               2012        % Change           2013               2012        % Change
                                    (dollars in thousands)                            (dollars in thousands)
Cost of services               $      4,754       $      1,573       202.2 %     $      8,222       $      4,361        88.5 %
Percent of revenue                     50.8 %             27.6 %                         33.3 %             28.4 %

Cost of services increased $3.2 million, or 202.2%, in the three months ended June 30, 2013 as compared to the three months ended June 30, 2012. The increase in cost of services was due primarily to a $3.0 million increase in personnel-related expenses, driven by stock-based compensation and one-time bonuses paid to long-tenured employees in connection with the IPO. In addition, other service-related costs increased $0.2 million due to revenue growth for our solutions, the most significant driver of which was revenue from the PlanSwift solution.
Cost of services increased $3.9 million, or 88.5%, in the nine months ended June 30, 2013 as compared to the nine months ended June 30, 2012. The increase in cost of services was primarily due to a $3.5 million increase in personnel-related expenses, driven by stock-based compensation and one-time bonuses paid to long-tenured employees in connection


with the IPO as well as increased headcount. In addition, other service-related costs increased $0.3 million due to revenue growth for our solutions, including revenue from the PlanSwift solution.

General and administrative
                                  Three Months Ended June 30,                         Nine Months Ended June 30,
                                    2013               2012        % Change             2013               2012        % Change
                                    (dollars in thousands)                              (dollars in thousands)
General and administrative     $      8,808       $      2,789        215.8 %     $      17,074       $      8,180       108.7 %
Percent of revenue                     94.1 %             49.0 %                           69.2 %             53.2 %

General and administrative expenses increased $6.0 million, or 215.8%, in the three months ended June 30, 2013 as compared to the three months ended June 30, 2012. The increase was primarily due to a $4.7 million increase in personnel-related expenses as well as a $0.4 million increase related to legal and accounting costs to support the preparation for our IPO. The increase in personnel-related expenses was due primarily to stock-based compensation and one-time bonuses paid to long-tenured employees in connection with the IPO as well as an increase in headcount as additional resources have been added to support the IPO process. In addition, equipment and maintenance expense increased $0.2 million, facilities and rent expense increased $0.1 million, and other miscellaneous overhead expenses increased $0.7 million.
General and administrative expenses increased $8.9 million, or 108.7%, in the nine months ended June 30, 2013 as compared to the nine months ended June 30, . . .

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