Income Taxes
The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 26% and 9% for the three and six months ended June 30, 2020, respectively. Discrete items, primarily related to excess tax benefits related to stock option exercises, of $0.1 million and $1.2 million for the three and six months ended June 30, 2020, respectively, are recognized as a benefit against income tax expense. For the three and six months ended June 30, 2020 the Company has an income tax expense of approximately $1.1 million and $0.6 million, respectively. The Company recorded income tax expense of $0.4 million and $1.2 million for the three and six months ended June 30, 2019.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed operations through cash flows from operations, debt and equity transactions. At June 30, 2020, our principal source of liquidity was $16.9 million in cash and $7.3 million in accounts receivables. Our anticipated uses of cash in the future will be to fund the expansion of our business.
Net cash provided by operating activities for the six months ended June 30, 2020 and 2019 was $3.3 million and $2.4 million, respectively. The increase in cash provided by operating activities for the six months ended June 30, 2020 was primarily due to an increase in our net income.
Net cash used in investing activities for the six months ended June 30, 2020 and 2019 was $0.7 million and $0.1 million, respectively. Cash used in investing activities for the six months ended June 30, 2020 was primarily related to the purchase of office equipment, IT infrastructure, and leasehold improvements related to our expansion into the second floor at our corporate headquarters. Cash used in investing activities for the six months ended June 30, 2019 was primarily related to leasehold improvements at our new corporate headquarters.
Net cash provided by financing activities for the six-months ended June 30, 2020 was $0.2 million, compared with net cash used in financing activities of $2.3 million for the same period in 2019. Net cash provided by financing activities for the six months ended June 30, 2020 was primarily due to proceeds from employee stock option purchases.Net cash used in financing activities for the six months ended June 30, 2019 was primarily due to the payment of a dividend of $2.3 million to stockholders of record on January 2, 2019 and re-purchases of our common stock of $0.2 million, which was partially offset by cash received upon the exercise of stock options of $0.1 million.
We believe our cash and cash equivalents, together with anticipated cash flow from operations will be sufficient to meet our working capital, and capital expenditure requirements for at least the next twelve months. In making this assessment, we considered the following:
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Our cash and cash equivalents balance at June 30, 2020 of $16.9 million;
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Our working capital balance of $23.8 million;
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Our profitability during the last 16 quarters; and
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Our projected income and cash flows for the next 12 months.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
Please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 2 to the Consolidated Financial Statements located within our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on February 27, 2020.
OFF BALANCE SHEET ARRANGEMENTS