UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2017
OR

[ ] | 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: 000-24821

| Care.com, Inc. |
(Exact name of registrant as specified in its charter)

Delaware | 20-578-5879
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number)
77 Fourth Avenue, Fifth Floor Waltham, MA | 02451
(Address of principal executive offices) | (Zip Code)

(781) 642-5900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Name of exchange on which registered
Common Stock, par value $0.001 |  | The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
| None |

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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | [ ] |  | Accelerated filer | [x]
Non-accelerated filer | [ ] | (Do not check if a smaller reporting company) | Smaller reporting company | [ ]
|  |  | Emerging growth company | [x]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [x]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
As of October 27, 2017, there were 30,083,455 shares of the registrant's common stock, $0.001 par value, outstanding.

CARE.COM, INC.
FORM 10-Q
TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION | Page
Item 1. | Financial Statements (Unaudited) |
| Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 | 2
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and September 24, 2016 | 4
| Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2017 and September 24, 2016 | 6
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and September 24, 2016 | 7
| Notes to Condensed Consolidated Financial Statements | 9
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 35
Item 4. | Controls and Procedures | 36
PART II - OTHER INFORMATION |
Item 1. | Legal Proceedings | 37
Item 1A. | Risk Factors | 37
Item 6. | Exhibits | 37
Signatures |  | 38

PART I
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CARE.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
(unaudited)

| September 30, 2017 |  | December 31, 2016
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 81,434 |  |  | $ | 61,094 |
Short-term investments | 15,000 |  |  | 15,000 |
Accounts receivable (net of allowance of $130 and $163, respectively) (1) | 4,120 |  |  | 2,789 |
Unbilled accounts receivable (2) | 5,462 |  |  | 5,541 |
Prepaid expenses and other current assets | 7,028 |  |  | 3,787 |
Total current assets | 113,044 |  |  | 88,211 |
Property and equipment, net | 4,001 |  |  | 4,947 |
Intangible assets, net | 1,136 |  |  | 1,708 |
Goodwill | 60,013 |  |  | 57,910 |
Other non-current assets | 2,062 |  |  | 2,448 |
Total assets | $ | 180,256 |  |  | $ | 155,224 |
Liabilities, redeemable convertible preferred stock, and stockholders' equity |  |  |
Current liabilities: |  |  |
Accounts payable (3) | $ | 2,340 |  |  | $ | 2,483 |
Accrued expenses and other current liabilities (4) | 20,592 |  |  | 12,798 |
Deferred revenue (5) | 19,589 |  |  | 15,971 |
Total current liabilities | 42,521 |  |  | 31,252 |
Deferred tax liability | 4,467 |  |  | 4,276 |
Other non-current liabilities | 5,993 |  |  | 5,087 |
Total liabilities | 52,981 |  |  | 40,615 |
Contingencies (see Note 5) | — |  |  | — |
Series A Redeemable Convertible Preferred Stock - 46 shares designated; 46 shares issued and outstanding at September 30, 2017 and December 31, 2016; at aggregate liquidation and redemption value at September 30, 2017 and December 31, 2016, respectively | 49,601 |  |  | 47,660 |
Stockholders' equity |  |  |
Preferred Stock: $0.001 par value - authorized 5,000 shares at September 30, 2017 and December 31, 2016, respectively | — |  |  | — |
Common stock, $0.001 par value; 300,000 shares authorized; 29,999 and 28,984 shares issued and outstanding at September 30, 2017 and December 31, 2016 respectively | 30 |  |  | 29 |
Additional paid-in capital | 262,272 |  |  | 255,031 |
Accumulated deficit | (185,049 | ) |  | (187,808 | )
Accumulated other comprehensive income (loss) | 421 |  |  | (303 | )
Total stockholders' equity | 77,674 |  |  | 66,949 |
Total liabilities, redeemable convertible preferred stock and stockholders' equity | $ | 180,256 |  |  | $ | 155,224 |

(1) Includes accounts receivable due from related party of $221 and $150 at September 30, 2017 and December 31, 2016, respectively (Note 13)
See accompanying notes to the condensed consolidated financial statements
2

(2) Includes unbilled accounts receivable due from related party of $89 and $286 at September 30, 2017 and December 31, 2016, respectively (Note 13)
(3) Includes accounts payable due to related party of $0 and $107 at September 30, 2017 and December 31, 2016, respectively (Note 13)
(4) Includes accrued expenses and other current liabilities due to related party of $1,571 and $1,055 at September 30, 2017 and December 31, 2016, respectively (Note 13)
(5) Includes deferred revenue associated with related party of $35 and $151 at September 30, 2017 and December 31, 2016, respectively (Note 13)
See accompanying notes to the condensed consolidated financial statements
3

CARE.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Revenue (1) | $ | 44,536 |  |  | $ | 40,791 |  |  | $ | 129,874 |  |  | $ | 118,241 |
Cost of revenue | 9,345 |  |  | 8,396 |  |  | 27,111 |  |  | 23,257 |
Operating expenses: |  |  |  |  |  |  |
Selling and marketing (2) | 17,749 |  |  | 20,075 |  |  | 54,799 |  |  | 58,103 |
Research and development | 6,202 |  |  | 5,115 |  |  | 18,857 |  |  | 15,026 |
General and administrative | 8,840 |  |  | 7,445 |  |  | 25,528 |  |  | 23,197 |
Depreciation and amortization | 419 |  |  | 582 |  |  | 1,266 |  |  | 2,501 |
Restructuring charges | 2,978 |  |  | — |  |  | 2,978 |  |  | 714 |
Total operating expenses | 36,188 |  |  | 33,217 |  |  | 103,428 |  |  | 99,541 |
Operating loss | (997 | ) |  | (822 | ) |  | (665 | ) |  | (4,557 | )
Other income (expense), net | 612 |  |  | (67 | ) |  | 1,921 |  |  | (210 | )
(Loss) income from continuing operations before income taxes | (385 | ) |  | (889 | ) |  | 1,256 |  |  | (4,767 | )
(Benefit from) provision for income taxes | (647 | ) |  | 332 |  |  | (1,503 | ) |  | 952 |
Income (loss) from continuing operations | 262 |  |  | (1,221 | ) |  | 2,759 |  |  | (5,719 | )
(Loss) income from discontinued operations, net of tax (see note 3) | — |  |  | (49 | ) |  | — |  |  | 7,785 |
Net income (loss) | 262 |  |  | (1,270 | ) |  | 2,759 |  |  | 2,066 |
Accretion of Series A Redeemable Convertible Preferred Stock dividends | (680 | ) |  | (616 | ) |  | (1,942 | ) |  | (616 | )
Accretion of Series A Redeemable Convertible Preferred Stock issuance costs | — |  |  | (2,124 | ) |  | — |  |  | (2,124 | )
Net income attributable to Series A Redeemable Convertible Preferred Stock | — |  |  | — |  |  | (113 | ) |  | — |
Net (loss) income attributable to common stockholders | $ | (418 | ) |  | $ | (4,010 | ) |  | $ | 704 |  |  | $ | (674 | )
Net (loss) income per share attributable to common stockholders (Basic): |  |  |  |  |  |  |
(Loss) income from continuing operations attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.27 | )
Income from discontinued operations attributable to common stockholders | — |  |  | — |  |  | — |  |  | 0.25 |
Net (loss) income per share attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.02 | )
Net (loss) income per share attributable to common stockholders (Diluted): |  |  |  |  |  |  |
(Loss) income from continuing operations attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.27 | )
Income from discontinued operations attributable to common stockholders | — |  |  | — |  |  | — |  |  | 0.25 |

See accompanying notes to the condensed consolidated financial statements
4

Net (loss) income per share attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.02 | )
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders: |  |  |  |  |  |  |
Basic | 29,825 |  |  | 28,769 |  |  | 29,510 |  |  | 31,045 |
Diluted | 32,521 |  |  | 28,769 |  |  | 32,085 |  |  | 31,045 |

(1) Includes related party revenue of $457 and $408 for the three months ended September 30, 2017 and September 24, 2016, respectively. Includes related party revenue of $1,281 and $965 for the nine months ended September 30, 2017 and September 24, 2016, respectively. (Note 13)
(2) Includes related party expenses of $3,655 and $4,580 for the three months ended September 30, 2017 and September 24, 2016, respectively. Includes related party expenses of $11,475 and $11,608 for the nine months ended September 30, 2017 and September 24, 2016, respectively. (Note 13)
See accompanying notes to the condensed consolidated financial statements
5

CARE.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Net income (loss) | $ | 262 |  |  | $ | (1,270 | ) |  | $ | 2,759 |  |  | $ | 2,066 |
Other comprehensive income (loss): |  |  |  |  |  |  |
Foreign currency translation adjustments | 203 |  |  | 277 |  |  | 724 |  |  | 650 |
Comprehensive income (loss) | $ | 465 |  |  | $ | (993 | ) |  | $ | 3,483 |  |  | $ | 2,716 |

See accompanying notes to the condensed consolidated financial statements
6

CARE.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

| Nine Months Ended
| September 30, 2017 |  | September 24, 2016
Cash flows from operating activities |  |  |
Net income | $ | 2,759 |  |  | $ | 2,066 |
Income from discontinued operations, net of tax | — |  |  | 7,785 |
Income (loss) from continuing operations | 2,759 |  |  | (5,719 | )
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities: |  |  |
Stock-based compensation | 6,586 |  |  | 4,765 |
Depreciation and amortization | 1,701 |  |  | 3,070 |
Deferred taxes | (1,593 | ) |  | 837 |
Foreign currency remeasurement gain | 1,671 |  |  | 351 |
Other non-cash operating (income) expense | 489 |  |  | (120 | )
Changes in operating assets and liabilities, net of effects from acquisitions: |  |  |
Accounts receivable | (1,290 | ) |  | (486 | )
Unbilled accounts receivable | 83 |  |  | (635 | )
Prepaid expenses and other current assets | (1,362 | ) |  | (1,015 | )
Other non-current assets | 444 |  |  | — |
Accounts payable | (181 | ) |  | (208 | )
Accrued expenses and other current liabilities | 7,313 |  |  | 2,161 |
Deferred revenue | 3,492 |  |  | 3,516 |
Other non-current liabilities | 1,166 |  |  | 1,040 |
Net cash provided by operating activities by continuing operations | 21,278 |  |  | 7,557 |
Net cash provided by operating activities by discontinued operations | — |  |  | 2,441 |
Net cash provided by operating activities | 21,278 |  |  | 9,998 |
Cash flows from investing activities |  |  |
Purchases of property and equipment | (566 | ) |  | (152 | )
Payments for acquisitions, net of cash acquired | — |  |  | (420 | )
Purchase of short-term investment | (15,000 | ) |  | (15,000 | )
Sale of short-term investment | 15,000 |  |  | — |
Payments for security deposits | (33 | ) |  | — |
Net cash used in investing activities | (599 | ) |  | (15,572 | )
Cash flows from financing activities |  |  |
Proceeds from issuance of Series A Redeemable Convertible Preferred Stock, net of issuance costs of $2,124 | — |  |  | 44,226 |
Proceeds from exercise of common stock options | 2,600 |  |  | 1,113 |
Payment for repurchase of common stock | — |  |  | (30,525 | )
Net cash provided by financing activities by continuing operations | 2,600 |  |  | 14,814 |
Net cash used in financing activities by discontinued operations | — |  |  | (14,510 | )
Net cash provided by financing activities | 2,600 |  |  | 304 |

See accompanying notes to the condensed consolidated financial statements
7

Effect of exchange rate changes on cash and cash equivalents | (2,939 | ) |  | (137 | )
Net increase (decrease) in cash and cash equivalents | 20,340 |  |  | (5,407 | )
Cash and cash equivalents, beginning of the period | 61,094 |  |  | 61,240 |
Cash and cash equivalents, end of the period | $ | 81,434 |  |  | $ | 55,833 |
Supplemental disclosure of cash flow activities |  |  |
Cash paid for taxes | $ | 101 |  |  | $ | 177 |
Supplemental disclosure of non-cash operating, investing and financing activities |  |  |
Unpaid purchases of property and equipment | $ | 62 |  |  | $ | 11 |
Series A Redeemable Convertible Preferred Stock dividend accretion | $ | 1,942 |  |  | $ | 616 |
Fair value of common shares received from legal settlement (Note 3) | $ | — |  |  | $ | 2,593 |

See accompanying notes to the condensed consolidated financial statements
8

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
1. Description of Business and Summary of Significant Accounting Policies
Care.com, Inc. (the “Company”, “we”, “us”, and “our”), a Delaware corporation, was incorporated on October 27, 2006. We are the world’s largest online marketplace for finding and managing family care. Our consumer matching solutions enable families to connect to caregivers and caregiving services in a reliable and easy way, and our payment solutions enable families to pay caregivers electronically online or via their mobile device and to manage their household payroll and tax matters with Care.com HomePay. In addition, we serve employers by providing access to our platform to employer-sponsored families and we serve care-related businesses—such as day care centers, nanny agencies and home care agencies—that wish to market their services to our care-seeking families and recruit our caregiver members.
Certain Significant Risks and Uncertainties
We operate in a dynamic industry and, accordingly, our business is affected by a variety of factors. For example, we believe that negative changes in any of the following areas could have a significant negative effect on our future financial position, results of operations or cash flows: rates of revenue growth; member engagement and usage of our existing and new products; protection of our brand; retention of qualified employees and key personnel; management of our growth; scaling and adaptation of existing technology and network infrastructure; competition in our market; performance of acquisitions and investments; protection of our intellectual property; protection of customers’ information and privacy concerns; security measures related to our website; and access to capital at acceptable terms, among other things.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on March 9, 2017.
There have been no material changes in our significant accounting policies for the three and nine months ended September 30, 2017 as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, with the exception of the adoption of the Financial Accounting Standards Board’s Accounting Standard Update 2016-09 in the first quarter of fiscal 2017. Refer below to “Recently Issued and Adopted Accounting Pronouncements” for further information.
The condensed consolidated balance sheet as of December 31, 2016, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP on an annual reporting basis.
In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, and are not necessarily indicative of the results of operations to be anticipated for fiscal 2017 or any future period.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries, after elimination of all intercompany balances and transactions. We have prepared the accompanying financial statements in conformity with GAAP.
Fiscal Year-End
We operate and report using a 52 or 53 week fiscal year ending on the Saturday in December closest and prior to December 31. Accordingly, our fiscal quarters end on the Saturday that falls closest to the last day of the third month of each quarter.
Subsequent Events Consideration
We consider events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure.
9

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
Subsequent events have been evaluated as required. There were no material recognized subsequent events recorded in the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2017.
Recently Issued and Adopted Accounting Pronouncements
As an ‘‘emerging growth company’’ under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we are electing to not take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to not take advantage of the extended transition period for complying with new or revised accounting standards is irrevocable.
In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting.” The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The adoption of ASU 2017-09, which will become effective for annual periods beginning after December 15, 2017 and for interim periods within those annual periods, is not expected to have a significant impact on our financial statement presentation or disclosures.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. The guidance is effective for us in our annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. ASU 2017-04 must be applied prospectively. We expect that the future adoption of this update will simplify our measurement of goodwill impairment, if any of our reporting units have a zero or negative carrying value, or would fail Step 1 of the impairment test following the date of adoption.
In November, 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning and ending balances shown on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. ASU 2016-18 must be applied retrospectively to all periods presented. We do not anticipate that the adoption of this update will have a material impact on our consolidated statement of cash flows.
In August 2016, FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230).” ASU 2016-15 amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The updated guidance requires a retrospective transition method to each period presented. We do not anticipate that the adoption of this update will have a material impact on our consolidated statement of cash flows.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation- Stock Compensation (Topic 718).” The guidance changes how companies account for certain aspects of share-based payments to employees. Entities will be required to recognize income tax effects of awards in the income statement when the awards vest or are settled. The guidance also allows an employer to repurchase more of an employee's shares than it can today for tax withholding purposes providing for withholding at the employee's maximum rate as opposed to the minimum rate without triggering liability accounting and to make a policy election to account for forfeitures as they occur. We adopted this standard in the first quarter of fiscal 2017 using a modified retrospective approach. We elected to account for forfeitures when they occur, rather than to estimate forfeitures when determining the amount of stock-based compensation costs to be recognized in each period. Refer to Note 9 for our accounting policy elections related to income taxes. The adoption of this standard has results in approximate $2.2 million of discrete tax benefits from stock-based compensation activity, which has been incorporated into our financial position, results of operations, and statement of cash flows.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The guidance requires an entity to recognize a right-of-use asset and a lease liability for virtually all of its leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The
10

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
amendments also require certain quantitative and qualitative disclosures about leasing arrangements. The guidance is effective for annual periods beginning after December 15, 2018. Early adoption is permitted. The updated guidance requires a modified retrospective adoption. We are currently evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial position and results of operations.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 by one year to December 15, 2017 for interim and annual reporting periods beginning after that date. Early adoption is permitted but not before the original effective date of December 15, 2016. Since ASU 2014-09 was issued, several additional ASUs have been issued and incorporated within ASC 606 to clarify various elements of the guidance.
As of the date of these condensed consolidated financial statements, we have substantially completed the diagnostic assessment phase of our ASU 2014-09 adoption, including preliminary assessment and project planning, revenue stream scoping, and analysis of the impact the new revenue standard has on our various revenue streams. As part of the Company’s ongoing evaluation of ASU 2014-09, the following revenue streams were identified: U.S. matching solutions, Care@Work solution, payments solutions, and marketing solutions. Each of these revenue streams will continue to be further evaluated in detail based on the criteria established under ASU 2014-09 and will serve as the basis for the accounting analysis and documentation as it relates to the impact of the standard.
We currently anticipate adopting ASU 2014-09 effective December 31, 2017 utilizing the modified retrospective method of adoption. Accordingly, upon adoption, we currently anticipate recognizing the cumulative effect, if any, of adopting this guidance as an adjustment to the opening balance of the accumulated deficit within the consolidated balance sheet for the period of adoption, and prior periods will not be retrospectively adjusted. While we have completed a preliminary assessment of the key provisions of ASU 2014-09, the evaluation of the full impact of the standard on the consolidated financial statements and related disclosures is ongoing, and we are therefore not yet able to reasonably estimate the financial statement impact of ASU 2014-09 upon adoption. We are continuing to assess all potential impacts of the standard, including the impact to the capitalization of costs for commissions. Additionally, we continue to actively monitor outstanding issues currently being addressed by the FASB’s Transition Resource Group as conclusions reached by this group may impact the Company’s application of ASU 2014-09.
2. Fair Value Measurements
The following table presents information about our assets measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value (in thousands):

| September 30, 2017 |  | December 31, 2016
| Fair Value Measurements Using Input Types |  |  |  | Fair Value Measurements Using Input Types |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market mutual funds | $ | 17,755 |  |  | $ | — |  |  | $ | — |  |  | $ | 17,755 |  |  | $ | 17,637 |  |  | $ | — |  |  | $ | — |  |  | $ | 17,637 |
Certificates of deposit | 17,282 |  |  | — |  |  | — |  |  | 17,282 |  |  | 17,377 |  |  | — |  |  | — |  |  | 17,377 |
Total assets | $ | 35,037 |  |  | $ | — |  |  | $ | — |  |  | $ | 35,037 |  |  | $ | 35,014 |  |  | $ | — |  |  | $ | — |  |  | $ | 35,014 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Restructuring liability | $ | — |  |  | $ | — |  |  | $ | 3,527 |  |  | $ | 3,527 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Total liabilities | $ | — |  |  | $ | — |  |  | $ | 3,527 |  |  | $ | 3,527 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |

The following table sets forth a summary of changes in fair value of our restructuring liability, which represents the recurring measurement that is classified within Level 3 of the fair value hierarchy wherein fair value is estimated using significant unobservable inputs (in thousands):
11

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)

| September 30, 2017
| Restructuring Liability
Beginning balance - December 31, 2016 | $ | — |
Restructuring charge | 3,620 |
Rent payments | (93 | )
Ending balance - September 30, 2017 | $ | 3,527 |

During the quarter ended September 30, 2017, we ceased use of 25,812 square feet of the Company’s headquarters facility located in Waltham, Massachusetts. We recorded a restructuring accrual of $3.5 million as of the period ended September 30, 2017. In order to estimate the lease obligation charges included in the restructuring accrual, we made certain assumptions, including the time period it will take to obtain a subtenant, construction costs and certain sublease rates. These estimates may vary from the sublease agreements ultimately executed, if at all, resulting in an adjustment to the charges. Refer to Note 11 for further discussion on the restructuring accrual in the third quarter of fiscal 2017.
Non-Recurring Fair Value Measurements
We re-measure the fair value of certain assets and liabilities upon the occurrence of certain events. Such assets are comprised of long-lived assets, including property and equipment, intangible assets and goodwill. In the three and nine months ended September 30, 2017 and September 24, 2016, no significant remeasurements were necessary. Other financial instruments not measured or recorded at fair value in the accompanying condensed consolidated balance sheets principally consist of accounts receivable, accounts payable, and accrued liabilities. The estimated fair values of these instruments approximate their carrying values due to their short-term nature.
3. Discontinued Operations
During the third quarter of fiscal 2015 we made the decision to exit the Citrus Lane business through either a sale or wind-down, as it was no longer a strategic priority. In the fourth quarter of fiscal 2015, we made the decision to shut down the business and completed our plans for exiting the business in the fourth quarter of 2016. As such, financial results of Citrus Lane have been presented within income (loss) from discontinued operations, net of tax, on the consolidated statements of operations for the three and nine months ended September 30, 2017 and September 24, 2016. As of September 30, 2017 and December 31, 2016 there were no recorded assets or liabilities of the Citrus Lane business.
In February 2016, we entered into a settlement agreement with the previous shareholders of Citrus Lane. The settlement agreement related to our acquisition of Citrus Lane and the merger agreement pursuant to which the acquisition was consummated. Under the terms of the settlement agreement, we paid the previous shareholders of Citrus Lane $15.6 million in contingent consideration payments that were valued at $16.0 million as of December 26, 2015 ($16.4 million was the undiscounted value at the time of the acquisition) that was otherwise payable to them in the event Citrus Lane achieved certain milestones in 2015 and 2016. In exchange, the former shareholders forfeited the $5.0 million in original cash consideration that was being held in an escrow account, as well as the 0.4 million shares of common stock issued at closing (valued at $2.0 million as of the February 2016 settlement date and $3.9 million as of the original closing date) and 0.1 million shares of common stock which was subject to the achievement of certain milestones in 2015 and 2016 (valued at $0.6 million as of the February 2016 settlement date and $1.1 million as of the original closing date) offered as part of the deal consideration. We retired these shares of common stock as of the third quarter of fiscal 2016. As a result of this settlement, and based on our assessment that there was not a clear and direct link to the original consideration transferred at the acquisition date, we have recognized a gain within income from discontinued operations on the consolidated statements of operations for the nine months ended March 26, 2016 of $8.0 million.
The following table presents financial results of the Citrus Lane business included in income from discontinued operations, net of tax, for the three and nine months ended September 24, 2016 (in thousands). There were no financial results of the Citrus Lane business included in income from discontinued operations, net of tax, for the three and nine months ended September 30, 2017.
12

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)

| Three Months Ended |  | Nine Months Ended
| September 24, 2016 |  | September 24, 2016
Revenue | $ | — |  |  | $ | 101 |
Cost of revenue | 4 |  |  | 101 |
Operating expenses: |  |  |
Selling and marketing | — |  |  | 54 |
Research and development | — |  |  | 11 |
General and administrative | 45 |  |  | (7,858 | )
Depreciation and amortization | — |  |  | 8 |
Operating (loss) income | (49 | ) |  | 7,785 |
Other expense, net | — |  |  | — |
(Loss) income from discontinued operations before income taxes | (49 | ) |  | 7,785 |
Provision for income tax | — |  |  | — |
Net (loss) income from discontinued operations | $ | (49 | ) |  | $ | 7,785 |

4. Goodwill and Intangible Assets
The following table presents the change in goodwill for the periods presented (in thousands):

Balance as of December 31, 2016 | $ | 57,910 |
Effect of currency translation | 2,103 |
Balance as of September 30, 2017 | $ | 60,013 |

The following table presents the detail of intangible assets for the periods presented (dollars in thousands):

| Gross Carrying Value |  | Accumulated Amortization |  | Net Carrying Value |  | Weighted-Average Remaining Life (Years)
September 30, 2017 |  |  |  |  |  |  |
Indefinite lived intangibles | $ | 242 |  |  | $ | — |  |  | $ | 242 |  |  | N/A
Trademarks and trade names | 4,461 |  |  | (4,309 | ) |  | 152 |  |  | 1.8
Proprietary software | 5,303 |  |  | (5,118 | ) |  | 185 |  |  | 1.2
Leasehold interests | 170 |  |  | (131 | ) |  | 39 |  |  | 1.6
Customer relationships | 8,834 |  |  | (8,316 | ) |  | 518 |  |  | 5.4
Total | $ | 19,010 |  |  | $ | (17,874 | ) |  | $ | 1,136 |  |  |
December 31, 2016 |  |  |  |  |  |  |
Indefinite lived intangibles | $ | 242 |  |  | $ | — |  |  | $ | 242 |  |  | N/A
Trademarks and trade names | 4,394 |  |  | (4,200 | ) |  | 194 |  |  | 2.5
Proprietary software | 5,102 |  |  | (4,485 | ) |  | 617 |  |  | 1.3
Non-compete agreements | 127 |  |  | (120 | ) |  | 7 |  |  | 0.6
Leasehold interests | 170 |  |  | (111 | ) |  | 59 |  |  | 2.3
Customer relationships | 8,754 |  |  | (8,165 | ) |  | 589 |  |  | 6.1
Total | $ | 18,789 |  |  | $ | (17,081 | ) |  | $ | 1,708 |  |  |

13

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
Amortization expense was $0.6 million and $1.9 million for the nine months ended September 30, 2017 and September 24, 2016, respectively. Of these amounts, $0.2 million and $1.3 million was classified as a component of depreciation and amortization, and $0.4 million and $0.6 million was classified as a component of cost of revenue in the condensed consolidated statements of operations for the nine months ended September 30, 2017 and September 24, 2016, respectively.
As of September 30, 2017, the estimated future amortization expense related to intangible assets for future fiscal years was as follows (in thousands):

2017 remaining | 97 |
2018 | 348 |
2019 | 148 |
2020 | 96 |
2021 | 96 |
Thereafter | 109 |
Total | $ | 894 |

5. Contingencies
Legal matters
From time to time we are involved in legal proceedings and other regulatory matters arising in the ordinary course of our business. Each reporting period, we evaluate whether or not a loss contingency related to such matters is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. If a loss is probable and the potential estimate of the loss is a range, we evaluate if there is a point within the range that appears at the time to be a better estimate than any other point in the range, and if so, that amount is accrued. If we conclude that no amount in the range appears to be a better estimate than any other, we accrue the minimum amount in the range. We monitor developments in legal matters that could affect estimates we have previously accrued and update our estimates as appropriate based on subsequent developments.
In the first quarter of fiscal 2017, we received a demand for payments totaling approximately $1.5 million relating to a government inquiry which commenced in 2016. The Company determined that it is probable that it will incur a loss in connection with this matter and accrued an amount as of December 31, 2016 based on its reasonable estimate of this loss. The Company accrued an additional amount as of the quarter ended April 1, 2017, based on its updated estimate of this loss. The total amount accrued was not material to our financial statements for the periods ended September 30, 2017 and December 31, 2016.
14

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
6. Stockholders’ Equity
Stock-Based Compensation
The following table summarizes stock-based compensation in our accompanying condensed consolidated statements of operations (in thousands):

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Cost of revenue | $ | 117 |  |  | $ | 79 |  |  | $ | 314 |  |  | $ | 233 |
Selling and marketing | 287 |  |  | 232 |  |  | 828 |  |  | 646 |
Research and development | 487 |  |  | 284 |  |  | 1,138 |  |  | 793 |
General and administrative | 2,144 |  |  | 1,156 |  |  | 4,306 |  |  | 3,093 |
Loss (income) from discontinued operations | — |  |  | — |  |  | — |  |  | 8 |
Total stock-based compensation | $ | 3,035 |  |  | $ | 1,751 |  |  | $ | 6,586 |  |  | $ | 4,773 |

Pursuant to our 2014 Incentive Award Plan (the “2014 Plan”), during the nine months ended September 30, 2017, we granted 0.5 million time-based restricted stock units (RSUs) to certain employees, advisors and directors, 0.4 million performance-based RSUs (“PSUs”) to certain members of management, and 0.2 million market-based RSUs (“MSUs”) to senior management.
In the first quarter of fiscal 2017, we issued 0.4 million PSUs. The number of PSUs that become eligible to vest for each recipient will be determined in the first quarter of 2018 based upon the Company’s level of achievement of certain financial targets for fiscal 2017. To the extent any PSUs become eligible to vest, they generally will vest over a three-year period retroactive to March 2017 as continued services are performed. Management is recognizing expense using the graded-vesting method based on its estimate of the number of PSUs that will vest. If there is a change in the estimate of the number of PSUs that are probable of vesting, we will cumulatively adjust compensation expense in the period that the change in estimate is made.
In the second quarter of fiscal 2017, we issued 0.2 million MSUs to senior management. The MSUs awarded will vest at any point during a five-year performance period, from 2017 through 2022, based on achievement of specified 120-day volume-weighted average closing share price targets, which is a market condition, or a change-in-control event, and if vested, will be issued in the form of common stock. The MSUs were valued at $11.18 - $12.20 per share using the Monte Carlo simulation model for the specified price targets. The stock-based compensation expense associated with the MSUs will be recognized over a weighted average derived service period of 1.14 - 1.54 years. If the market condition or the performance condition is not achieved during the five-year performance period, then the shares will be forfeited.
RSUs are not included in issued and outstanding common stock until the shares are vested and released. With the exception of MSUs, the fair value of an RSU and PSU is measured based on the market price of the underlying common stock as of the date of grant, reduced by the purchase price of $0.001 per share. The weighted-average grant-date fair value per vested RSU and PSU share and the total fair value of vested shares from RSU and PSU grants was $7.59 and $3.2 million, res pectively, for the nine months ended September 30, 2017.
During the nine months ended September 30, 2017, we granted 1.0 million stock options to certain employees and directors with a weighted average exercise price per share of $12.82. During the nine months ended September 24, 2016, we granted 1.4 million stock options to certain employees and directors with a weighted average exercise price per share of $6.68.
15

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
The following table presents the assumptions used to estimate the fair value of options granted during the periods presented:

| Nine Months Ended
| September 30, 2017 |  | September 24, 2016
Risk-free interest rate | 1.86% - 2.18% |  | 1.19 - 1.63 %
Expected term (years) | 6.25 |  | 6.25
Volatility | 32.0% - 33.4% |  | 33.8% - 38.2%
Expected dividend yield | — |  | —

A summary of stock option, RSU, PSU, and MSU activity for the nine months ended September 30, 2017 was as follows (in thousands for shares and intrinsic value):

|  |  |  |  |  |  |  |  | Restricted Stock Units
| Shares |  | Weighted-Average Remaining Contractual Term (Years) |  | Weighted-Average Exercise Price |  | Aggregate Intrinsic Value |  | Shares |  | Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2016 | 4,312 |  |  | 6.45 |  | $ | 6.64 |  |  | $ | 13,042 |  |  | 1,780 |  |  | $ | 7.08 |
Granted(1) | 974 |  |  |  |  | $ | 12.82 |  |  |  |  | 1,085 |  |  | $ | 11.59 |
Settled (RSUs and PSUs) | — |  |  |  |  | — |  |  |  |  | (421 | ) |  | $ | 7.59 |
Exercised | (583 | ) |  |  |  | $ | 4.47 |  |  |  |  | — |  |  | — |
Canceled and forfeited | (215 | ) |  |  |  | $ | 12.72 |  |  |  |  | (541 | ) |  | $ | 7.08 |
Outstanding as of September 30, 2017 | 4,488 |  |  | 6.69 |  | $ | 7.97 |  |  | $ | 36,960 |  |  | 1,903 |  |  | $ | 9.54 |
Vested and exercisable as of September 30, 2017 | 2,769 |  |  | 5.29 |  | $ | 6.64 |  |  | $ | 26,869 |  |  | N/A |  | N/A

____________________________
(1) For RSUs, includes time-based, performance-based, and market-based restricted stock units
Aggregate intrinsic value represents the difference between the closing stock price of our common stock and the exercise price of outstanding, in-the-money options. Our closing stock price as reported on the New York Stock Exchange as of September 29, 2017, the final trading day of the nine months ended September 30, 2017, was $15.89. The total intrinsic value of options exercised and RSUs and PSUs vested was approximately $10.4 million for the nine months ended September 30, 2017. The aggregate fair value of the options that vested during the nine months ended September 30, 2017 was $1.7 million.
As of September 30, 2017, total unrecognized compensation cost related to non-vested stock options and RSUs was approximately $6.4 million and $14.9 million, respectively, which is expected to be recognized over a weighted-average period of 2.8 years and 2.3 years, respectively, to the extent they are probable of vesting. As of September 30, 2017, we had 2.5 million shares available for grant under the 2014 Plan.
16

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
Common Stock
As of September 30, 2017, we had reserved the following shares of common stock for future issuance in connection with the following (in thousands):

| September 30, 2017
Options issued and outstanding | 4,488 |
Restricted stock units issued and outstanding | 1,903 |
Common stock available for stock-based award grants under incentive award plans | 2,490 |
Common stock available for conversion of Series A Redeemable Convertible Preferred Stock | 4,724 |
Total | 13,605 |

7. Net (Loss) Income per Share Attributable to Common Stockholders
Basic net (loss) income per share is computed by dividing net (loss) income attributable to common shareholders by the weighted-average number of common shares outstanding during the period. For the three and nine months ended September 30, 2017 and September 24, 2016, we applied the two-class method to calculate basic and diluted net income per share of common stock, as our Series A Redeemable Convertible Preferred Stock (Series A Preferred Stock) is a participating security. The two-class method is an earnings allocated formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. We compute diluted net (loss) income per common share using income from continuing operations as the “control number” in determining whether potential common shares are dilutive, after giving consideration to all potentially dilutive common shares, including stock options, unvested restricted stock outstanding during the period and potential issuance of stock upon the conversion of the our Series A Preferred Stock, including accrued dividends, outstanding during the period, except where the effect of such securities would be antidilutive.
The calculations of basic and diluted net (loss) income per share and basic and dilutive weighted-average shares outstanding for the three and nine months ended September 30, 2017 and September 24, 2016 were as follows (in thousands, except per share data):
17

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Numerator: |  |  |  |  |  |  |
Net (loss) income attributable to common stockholders - basic | $ | (418 | ) |  | $ | (4,010 | ) |  | $ | 704 |  |  | $ | (674 | )
Net (loss) income attributable to common stockholders - diluted | $ | (418 | ) |  | $ | — |  |  | $ | 712 |  |  | $ | — |
Denominator: |  |  |  |  |  |  |
Weighted-average shares outstanding - basic | 29,825 |  |  | 28,769 |  |  | 29,510 |  |  | 31,045 |
Dilutive impact from: |  |  |  |  |  |  |
Options outstanding | 1,962 |  |  | — |  |  | 1,869 |  |  | — |
Restricted stock units | 734 |  |  | — |  |  | 706 |  |  | — |
Weighted-average shares outstanding - dilutive | 32,521 |  |  | 28,769 |  |  | 32,085 |  |  | 31,045 |
Net (loss) income per share attributable to common stockholders (Basic): |  |  |  |  |  |  |
(Loss) income from continuing operations attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.27 | )
Income from discontinued operations attributable to common stockholders | — |  |  | — |  |  | — |  |  | 0.25 |
Net (loss) income per share attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.02 | )
Net (loss) income per share attributable to common stockholders (Diluted): |  |  |  |  |  |  |
(Loss) income from continuing operations attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.27 | )
Income from discontinued operations attributable to common stockholders | — |  |  | — |  |  | — |  |  | 0.25 |
Net (loss) income per share attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.02 | )

The following equity shares were excluded from the calculation of diluted net income per share from continuing operations and discontinued operations because their effect would have been antidilutive for the periods presented (in thousands):

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Stock options | 1,385 |  |  | 4,444 |  |  | 1,334 |  |  | 4,444 |
Restricted stock units | 184 |  |  | 1,940 |  |  | 108 |  |  | 1,940 |
Series A Redeemable Convertible Preferred Stock (as converted to common stock) | 4,724 |  |  | 4,473 |  |  | 4,724 |  |  | 4,473 |

The Series A Preferred Stock is considered antidilutive due to the fact that the two-class method was more dilutive when calculating dilutive net income per share attributable to common stockholders.
18

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
8. Preferred Stock
Preferred Stock consists of the following at September 30, 2017 and December 31, 2016 (in thousands, except shares):

| Preferred Stock Authorized |  | Issuance Date |  | Issued and Outstanding |  | Liquidation Preference (as of June 29, 2023) |  | Carrying Value |  | Common Stock Issuable Upon Conversion (as of June 29, 2023)
September 30, 2017
Series A | 46,350 |  |  | June 29, 2016 |  | 46,350 |  |  | $ | 67,424 |  |  | $ | 49,601 |  |  | 6,421,369 |
December 31, 2016
Series A | 46,350 |  |  | June 29, 2016 |  | 46,350 |  |  | $ | 67,424 |  |  | $ | 47,660 |  |  | 6,421,369 |

Please refer to Form 10-K filed on March 9, 2017 for further detail on the Series A Redeemable Convertible Preferred Stock.
9. Income Taxes
We recorded income tax (benefit) expense of $(0.6) million and $0.3 million for the three months ended September 30, 2017 and September 24, 2016, respectively, and $(1.5) million and $1.0 million for the nine months ended September 30, 2017 and September 24, 2016. The tax expense recorded for the three months ended September 30, 2017 primarily related to the tax expense pertaining to amortization of goodwill associated with the acquisition of Care.com HomePay for tax purposes, for which there is no corresponding book deduction, and certain state taxes based on operating income that are payable without regard to tax loss carryforwards. These expenses were offset by excess tax benefits recorded from the taxable compensation on share-based awards. The tax benefit recorded for the nine months ended September 30, 2017 primarily related to the excess tax benefits from the taxable compensation on share-based awards, partially offset by tax expense pertaining to amortization of goodwill associated with the acquisition of Care.com HomePay for tax purposes, and certain state taxes based on operating income that are payable without regard to tax loss carryforwards.
Prior to January 1, 2017, we recognized the excess tax benefits of stock-based compensation expense as additional paid-in capital (“APIC”), and tax deficiencies of stock-based compensation expense in the income tax provision or as APIC to the extent that there were sufficient recognized excess tax benefits previously recognized. As a result of the prior guidance that excess tax benefits reduce taxes payable prior to being recognized as an increase in paid in capital, we had not recognized certain deferred tax assets (all tax attributes such as loss or credit carryforwards) that could be attributed to tax deductions related to equity compensation in excess of compensation recognized for financial reporting. As of January 1, 2017, we had generated federal and state net operating loss carryforwards due to excess tax benefits of $2.2 million and $1.9 million, respectively.
Effective as of January 1, 2017, we adopted a change in accounting policy in accordance with ASU 2016-09 to account for excess tax benefits and tax deficiencies as income tax expense or benefit, treated as discrete items in the reporting period in which they occur, and to recognize previously unrecognized deferred tax assets that arose directly from (or the use of which was postponed by) tax deductions related to equity compensation in excess of compensation recognized for financial reporting. No cumulative transition adjustments were recorded to accumulated deficit as a result of this change in the accounting policy, as we had previously maintained a valuation allowance against our deferred tax assets that could be attributed to equity compensation in excess of compensation recognized for financial reporting.
10. Segment and Geographical Information
We consider operating segments to be components of the Company in which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is the CEO. The CEO reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. For the periods presented we have concluded that we have a single operating and reportable segment.
No country outside of the United States provided greater than 10% of our total revenue. Revenue is classified by the major geographic areas in which our customers are located. The following table summarizes total revenue generated by our geographic locations (dollars in thousands):
19

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
United States | $ | 40,344 |  |  | $ | 37,293 |  |  | $ | 118,522 |  |  | $ | 107,993 |
International | 4,192 |  |  | 3,498 |  |  | 11,352 |  |  | 10,248 |
Total revenue | $ | 44,536 |  |  | $ | 40,791 |  |  | $ | 129,874 |  |  | $ | 118,241 |

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
| (As a percentage of revenue) |  |  |  |
United States | 91 | % |  | 91 | % |  | 91 | % |  | 91 | %
International | 9 | % |  | 9 | % |  | 9 | % |  | 9 | %
Total revenue | 100 | % |  | 100 | % |  | 100 | % |  | 100 | %

Our long-lived assets are primarily located in the United States and are not allocated to any specific region. Therefore, geographic information is presented only for total revenue.
11. Restructuring Charges
On April 14, 2016, we entered into a sublease agreement to lease approximately 10,362 square feet of our 108,743 square foot headquarters facility located in Waltham, Massachusetts.
During the quarter ended June 25, 2016, we recorded a $0.5 million sublease loss liability and related expenses of $0.2 million for the expected loss on the sublease, in accordance with ASC 840-20, Leases, because the monthly payments we expect to receive under the sublease are less than the amounts that we will owe the lessor for the sublease space. The sublease term is less than the remaining term under the original lease, and thus we do not believe we have met a cease use date as we may re-enter the space following the sublease. The fair value of the liability was determined using the estimated future net cash flows, consisting of the minimum lease payments to the lessor for the sublease space and payments we will receive under the sublease. The sublease loss was recorded as part of restructuring expense in the consolidated statement of operations.
Additionally, during the quarter ended September 30, 2017, we ceased use of an additional 25,812 square feet of the same facility. We recorded a lease obligation charge of $3.0 million in the third quarter of 2017. The lease obligation charge comprised of restructuring expense, including sublease income and construction costs, of $3.6 million. Additionally, we wrote-off $0.5 million of lease-hold improvements related to the space. This was partially offset by the write-off of $1.1 million of deferred rent and tenant improvement allowances associated with the portion of the facility that was exited. In order to estimate the lease obligation charges included in the restructuring expense, we made certain assumptions, including the time period it will take to obtain a subtenant, construction costs, and certain sublease rates. These estimates may vary from the sublease agreements ultimately executed, if at all, resulting in an adjustment to the charges. The restructuring charge was recorded as restructuring expense in the consolidated statements of operations for the three and nine months ended September 30, 2017. The recorded restructuring accrual associated with this event is classified within Level 3 of the fair value hierarchy wherein fair value is estimated using significant unobservable inputs.
The following table presents the change in restructuring liability from December 31, 2016 to September 30, 2017 (in thousands):
20

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)

| September 30, 2017
| Restructuring Liability
Balance as of December 31, 2016 | $ | 356 |
Restructuring charges | 3,620 |
Accretion of sublease liability | (158 | )
Balance as of September 30, 2017 | $ | 3,818 |

12. Other Income (Expense)
Other income (expense) consisted of the following (in thousands):

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Interest income | $ | 107 |  |  | $ | 80 |  |  | $ | 266 |  |  | $ | 151 |
Interest expense | (3 | ) |  | (1 | ) |  | (5 | ) |  | (3 | )
Gain (loss) on foreign exchange | 508 |  |  | (147 | ) |  | 1,660 |  |  | (358 | )
Other income (expense), net | — |  |  | 1 |  |  | — |  |  | — |
Total income (expense) | $ | 612 |  |  | $ | (67 | ) |  | $ | 1,921 |  |  | $ | (210 | )

13. Related Party Transactions
We had the following transactions with related parties during the three and nine months ended months ended September 30, 2017:
CapitalG LP
On June 29, 2016, we issued Series A Preferred Stock to CapitalG LP, as described in Note 8. As a result of this transaction, Alphabet Inc., the ultimate parent of CapitalG LP (“CapitalG”), and all related affiliates of Alphabet Inc. are considered to be related parties. During the three and nine months ended September 30, 2017, we had recorded $0.5 million and $1.3 million of revenue from Care@Work arrangements with Alphabet Inc. and its affiliates, respectively. During the three and nine months ended September 24, 2016, we had recorded $0.4 million and $1.0 million of revenue from Care@Work arrangements with Alphabet Inc. and its affiliates, respectively. During the three and nine months ended September 30, 2017, we incurred $3.7 million and $10.3 million of selling and marketing expenses for internet based marketing services with Alphabet Inc. and its affiliates, respectively. During the three and nine months ended September 24, 2016, we incurred $4.7 million and $11.6 million of selling and marketing expenses with Alphabet Inc. and its affiliates, respectively. As of September 30, 2017, we had $0.2 million and $0.1 million of accounts receivable and unbilled accounts receivable, respectively, recorded with Alphabet Inc. and its affiliates. As of December 31, 2016, we had $0.1 million and $0.3 million of accounts receivable and unbilled accounts receivable, respectively, recorded with Alphabet Inc. and its affiliates. As of September 30, 2017, we had $1.6 million of accrued expenses and other current liabilities recorded with Alphabet Inc. and its affiliates. As of December 31, 2016, we had $0.2 million, $0.1 million, and $1.1 million of deferred revenue, accounts payable, and accrued expenses and other current liabilities, respectively, recorded with Alphabet Inc. and its affiliates.
West of Everything, the successor of West Studios, LLC
In fiscal 2016, we entered into a professional services agreement with West of Everything, the successor of West Studios, LLC (“West”). We consider West to be a related party because one of our board members is acting as a Managing Director of the entity. Under the terms of the agreement, we incurred an aggregate of $1.4 million in service fees between the fourth quarter of fiscal 2016 and the second quarter of fiscal 2017, prior to terminating the agreement in the second quarter of fiscal 2017. During the six months ended July 1, 2017, we incurred $1.2 million of selling and marketing expenses related to our West relationship.
Repurchase of Common Stock from Matrix Partners VII, L.P. and Weston & Co. VII LLC
On June 27, 2016, we entered into a Stock Repurchase Agreement (the “Stock Repurchase Agreement”) to repurchase an aggregate of 3.7 million shares of common stock at a price of $8.25 per share (the “Stock Repurchase”) from Matrix Partners
21

CARE.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
VII, L.P. and Weston & Co. VII LLC, as Nominee (together, the “Sellers”). The Stock Repurchase closed on June 29, 2016. Pursuant to the Stock Repurchase Agreement, the Sellers were subject to a 90-day lock-up provision related to the remaining shares of common stock they held following the closing of the Stock Repurchase.

ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on March 9, 2017. In addition to historical information, this discussion contains forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from our expectations.
Overview
We are the world’s largest online marketplace for finding and managing family care. We have more than 26.4 million members, including 15.0 million families and 11.4 million caregivers, spanning over 20 countries. We help families address their particular lifecycle of care needs, which may include child care, senior care, special needs care and other non-medical family care needs such as pet care, tutoring and housekeeping. In the process, we also help caregivers find rewarding full-time and part-time employment opportunities.
Our consumer matching solutions allow families to search for, qualify, vet, connect with and ultimately select caregivers in a low-cost, reliable and easy way. We also provide caregivers with solutions to create personal profiles, describe their unique skills and experience, and otherwise differentiate and market themselves in a highly fragmented marketplace.
In addition to our consumer matching solutions, we offer our members innovative products and services to facilitate their interaction with caregivers. We provide solutions intended to improve both the ease and reliability of the care relationship in the home. One product area we are particularly focused on is consumer payments solutions. Through Care.com HomePay, families can subscribe to payroll and tax preparation services for domestic employees. This offering deepens our relationship with our members and could enhance the lifetime value associated with each member.
We also serve employers through our Care@Work offering by providing access to certain of our products and services, including back-up care for children and seniors, to employer-sponsored families. In addition, we serve care-related businesses— such as day care centers, nanny agencies and home care agencies — that wish to market their services to our care-seeking families and recruit our caregiver members. These businesses improve our member experience by providing additional caregiving choices for families and employment opportunities for caregivers.
We have experienced steady growth in revenue and members. Our members increased to 26.4 million as of September 30, 2017 from 22.0 million as of September 24, 2016, representing a 20% annual growth rate. Our revenue has increased to $129.9 million for the nine months ended September 30, 2017 from $118.2 million for the nine months ended September 24, 2016. We experienced net income from continuing operations of $2.8 million and net losses from continuing operations of $5.7 million in the nine months ended September 30, 2017 and September 24, 2016, respectively. We completed the closure of the Citrus Lane business in the fourth quarter of fiscal 2016, and we had no income or losses from discontinued operations for the nine months ended September 30, 2017. In comparison, we had net income from discontinued operations of $7.8 million in the nine months ended September 24, 2016 due to a settlement agreement completed in the first quarter of fiscal 2016. Refer to Note 3.
22

Key Business Metrics
In addition to traditional financial and operational metrics, we use the following business metrics to monitor and evaluate results (in thousands, except monthly average revenue per member - U.S. Consumer Business):

| As of
| September 30, 2017 |  | September 24, 2016
Total members | 26,393 |  |  | 21,968 |
Total families | 14,967 |  |  | 12,383 |
Total caregivers | 11,427 |  |  | 9,585 |
Paying families - U.S. Consumer Business | 320 |  |  | 291 |
Monthly average revenue per paying family - U.S. Consumer Business | $ | 38 |  |  | $ | 39 |

Total Members. We define total members as the sum of paying families, non-paying families, and caregivers worldwide who have registered through our websites and mobile apps since the launch of our marketplace in 2007. Total members also includes subscribers of our Care.com HomePay service. We believe this metric is significant to our business because it represents the universe of families and caregivers who are more likely than the general population to drive revenue because our members are more familiar with our brand and the services we offer and are interested enough in them to have registered. Our total members increased 20% as of September 30, 2017, compared to the corresponding period in the prior fiscal year.
Total Families. We define total families as the number of paying families and non-paying families who have registered through our websites and mobile apps since the launch of our marketplace in 2007. Total families also includes subscribers of our Care.com HomePay service. Our total families increased 21% as of September 30, 2017, compared to the corresponding period in the prior fiscal year.
Total Caregivers. We define total caregivers as the number of caregivers who have registered through our websites and mobile apps since the launch of our marketplace in 2007. Our total caregivers increased 19% as of September 30, 2017, compared to the corresponding period in the prior fiscal year.
Paying Families - U.S. Consumer Business. We define paying families - U.S. Consumer Business as the number of families located in the United States who have registered through our U.S.-based websites and mobile apps and who are paying subscribers of our U.S.-based matching services or our Care.com HomePay services as of the end of the fiscal period. The number of paying families in our U.S. Consumer Business increased 10% as of September 30, 2017, compared to the corresponding period in the prior fiscal year.
Monthly Average Revenue per Paying Family - U.S. Consumer Business. We define monthly average revenue per paying family, or ARPPF, for our U.S. Consumer Business as total U.S. Consumer Business revenue, including revenue from subscriptions and products, divided by the average number of paying families of our U.S.-based matching services and Care.com HomePay services in a given fiscal period, expressed on a monthly basis. We believe ARPPF is significant to our business because it represents how successful we have been at monetizing the subset of members who we have converted into paying families. The numerator of this metric includes revenue that comes from caregivers in addition to revenue that comes from families - while the denominator includes only paying families. We believe this is the most meaningful presentation because we do not consider the caregiver component of our business to be separate and distinct; rather, we believe revenue generated from caregivers is a byproduct of the families that have registered on our site. Our U.S. Consumer Business ARPPF as of September 30, 2017 decreased by 2.6% compared to the same period in the prior fiscal year.
Adjusted EBITDA
To provide investors with additional information regarding our financial results, we have disclosed in the table below and within this Quarterly Report on Form 10-Q adjusted EBITDA, a non-GAAP financial measure. The table below represents a reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.
We have included adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measure used by our management and board of directors to understand and evaluate our consolidated operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business.
Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
23

Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
• adjusted EBITDA does not reflect discontinued operations;
• adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
• adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation;

• | adjusted EBITDA does not include accretion of Series A Redeemable Convertible Preferred Stock dividends or issuance costs;

• adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
• adjusted EBITDA does not reflect one time unusual or non-cash significant adjustments; and
• other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Because of these limitations, you should consider adjusted EBITDA alongside our GAAP financial results. The following table presents a reconciliation of adjusted EBITDA for each of the periods indicated (in thousands):

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Income (loss) from continuing operations | $ | 262 |  |  | $ | (1,221 | ) |  | $ | 2,759 |  |  | $ | (5,719 | )
Federal, state and franchise taxes | (589 | ) |  | 395 |  |  | (1,299 | ) |  | 1,211 |
Other (income) expense, net | (612 | ) |  | 67 |  |  | (1,921 | ) |  | 210 |
Depreciation and amortization | 502 |  |  | 756 |  |  | 1,701 |  |  | 3,070 |
EBITDA | (437 | ) |  | (3 | ) |  | 1,240 |  |  | (1,228 | )
Stock-based compensation | 3,035 |  |  | 1,751 |  |  | 6,586 |  |  | 4,765 |
Merger and acquisition related costs | 141 |  |  | 26 |  |  | 236 |  |  | 100 |
Restructuring related costs | 2,978 |  |  | — |  |  | 2,978 |  |  | 714 |
Litigation related costs | — |  |  | — |  |  | 75 |  |  | — |
Software implementation costs | 229 |  |  | — |  |  | 457 |  |  | — |
Severance related costs | 200 |  |  | — |  |  | 321 |  |  | — |
Adjusted EBITDA | $ | 6,146 |  |  | $ | 1,774 |  |  | $ | 11,893 |  |  | $ | 4,351 |

Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the assumptions and estimates associated with the following critical accounting policies have the greatest potential impact on our condensed consolidated financial statements:
• Revenue recognition;
• Redeemable convertible preferred stock;
• Goodwill;
24

• Amortization and impairment of intangible assets;
• Income taxes; and
• Stock-based compensation.
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed on March 9, 2017 with the exception of the adoption of ASU 2016-09. With the adoption of ASU 2016-09, we now recognize the income tax effects of awards in the statement of operations when the awards vest or are settled. Please refer to Note 1 for further detail.
Recently Issued and Adopted Accounting Pronouncements
For information on recent accounting pronouncements, see Recently Issued and Adopted Accounting Standards in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
25

Results of Operations
The following table sets forth our condensed consolidated results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results (in thousands, except per share data):

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Revenue | $ | 44,536 |  |  | $ | 40,791 |  |  | $ | 129,874 |  |  | $ | 118,241 |
Cost of revenue | 9,345 |  |  | 8,396 |  |  | 27,111 |  |  | 23,257 |
Operating expenses: |  |  |  |  |  |  |
Selling and marketing | 17,749 |  |  | 20,075 |  |  | 54,799 |  |  | 58,103 |
Research and development | 6,202 |  |  | 5,115 |  |  | 18,857 |  |  | 15,026 |
General and administrative | 8,840 |  |  | 7,445 |  |  | 25,528 |  |  | 23,197 |
Depreciation and amortization | 419 |  |  | 582 |  |  | 1,266 |  |  | 2,501 |
Restructuring charges | 2,978 |  |  | — |  |  | 2,978 |  |  | 714 |
Total operating expenses | 36,188 |  |  | 33,217 |  |  | 103,428 |  |  | 99,541 |
Operating loss | (997 | ) |  | (822 | ) |  | (665 | ) |  | (4,557 | )
Other income (expense), net | 612 |  |  | (67 | ) |  | 1,921 |  |  | (210 | )
(Loss) income from continuing operations before income taxes | (385 | ) |  | (889 | ) |  | 1,256 |  |  | (4,767 | )
(Benefit from) provision for income taxes | (647 | ) |  | 332 |  |  | (1,503 | ) |  | 952 |
Income (loss) from continuing operations | 262 |  |  | (1,221 | ) |  | 2,759 |  |  | (5,719 | )
Loss (income) from discontinued operations, net of tax | — |  |  | (49 | ) |  | — |  |  | 7,785 |
Net income (loss) | 262 |  |  | (1,270 | ) |  | 2,759 |  |  | 2,066 |
Accretion of Series A Redeemable Convertible Preferred Stock dividends | (680 | ) |  | (616 | ) |  | (1,942 | ) |  | (616 | )
Accretion of Series A Redeemable Convertible Preferred Stock issuance costs | — |  |  | (2,124 | ) |  | — |  |  | (2,124 | )
Net income attributable to Series A Redeemable Convertible Preferred Stock | — |  |  | — |  |  | (113 | ) |  | — |
Net (loss) income attributable to common stockholders | $ | (418 | ) |  | $ | (4,010 | ) |  | $ | 704 |  |  | $ | (674 | )
Net (loss) income per share attributable to common stockholders (Basic): |  |  |  |  |  |  |
(Loss) income from continuing operations attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.27 | )
Income from discontinued operations attributable to common stockholders | — |  |  | — |  |  | — |  |  | 0.25 |
Net (loss) income per share attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.02 | )
Net (loss) income per share attributable to common stockholders (Diluted): |  |  |  |  |  |  |
(Loss) income from continuing operations attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.27 | )
Income from discontinued operations attributable to common stockholders | — |  |  | — |  |  | — |  |  | 0.25 |
Net (loss) income per share attributable to common stockholders | $ | (0.01 | ) |  | $ | (0.14 | ) |  | $ | 0.02 |  |  | $ | (0.02 | )

26

Weighted-average shares used to compute net (loss) income per share attributable to common stockholders: |  |  |  |  |  |  |
Basic | 29,825 |  |  | 28,769 |  |  | 29,510 |  |  | 31,045 |
Diluted | 32,521 |  |  | 28,769 |  |  | 32,085 |  |  | 31,045 |

Stock-based compensation included in the results of operations data above was as follows (in thousands):

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Cost of revenue | $ | 117 |  |  | $ | 79 |  |  | $ | 314 |  |  | $ | 233 |
Selling and marketing | 287 |  |  | 232 |  |  | 828 |  |  | 646 |
Research and development | 487 |  |  | 284 |  |  | 1,138 |  |  | 793 |
General and administrative | 2,144 |  |  | 1,156 |  |  | 4,306 |  |  | 3,093 |
Loss (income) from discontinued operations | — |  |  | — |  |  | — |  |  | 8 |
Total stock-based compensation | $ | 3,035 |  |  | $ | 1,751 |  |  | $ | 6,586 |  |  | $ | 4,773 |

27

The following tables set forth our condensed consolidated results of operations for the periods presented as a percentage of revenue for those periods (certain items may not foot due to rounding).

| Three Months Ended |  | Nine Months Ended
| September 30, 2017 |  | September 24, 2016 |  | September 30, 2017 |  | September 24, 2016
Revenue | 100 | % |  | 100 | % |  | 100 | % |  | 100 | %
Cost of revenue | 21 | % |  | 21 | % |  | 21 | % |  | 20 | %
Operating expenses: |  |  |  |  |  |  |
Selling and marketing | 40 | % |  | 49 | % |  | 42 | % |  | 49 | %
Research and development | 14 | % |  | 13 | % |  | 15 | % |  | 13 | %
General and administrative | 20 | % |  | 18 | % |  | 20 | % |  | 20 | %
Depreciation and amortization | 1 | % |  | 1 | % |  | 1 | % |  | 2 | %
Restructuring charges | 7 | % |  | — | % |  | 2 | % |  | 1 | %
Total operating expenses | 81 | % |  | 81 | % |  | 80 | % |  | 84 | %
Operating loss | (2 | )% |  | (2 | )% |  | (1 | )% |  | (4 | )%
Other income (expense), net | 1 | % |  | — | % |  | 1 | % |  | — | %
(Loss) income from continuing operations before income taxes | (1 | )% |  | (2 | )% |  | 1 | % |  | (4 | )%
(Benefit from) provision for income taxes | (1 | )% |  | 1 | % |  | (1 | )% |  | 1 | %
Income (loss) from continuing operations | 1 | % |  | (3 | )% |  | 2 | % |  | (5 | )%
Loss (income) from discontinued operations, net of tax | — | % |  | — | % |  | — | % |  | 7 | %
Net income (loss) | 1 | % |  | (3 | )% |  | 2 | % |  | 2 | %
Accretion of Series A Redeemable Convertible Preferred Stock dividends | (2 | )% |  | (2 | )% |  | (1 | )% |  | (1 | )%
Accretion of Series A Redeemable Convertible Preferred Stock issuance costs | — | % |  | (5 | )% |  | — | % |  | (5 | )%
Net income attributable to Series A Redeemable Convertible Preferred Stock | — | % |  | — | % |  | — | % |  | — | %
Net (loss) income attributable to common stockholders | (1 | )% |  | (10 | )% |  | 1 | % |  | (1 | )%

Revenue
We generate revenue primarily through (a) subscription fees to our suite of products and services, which enable families to manage their diverse and evolving care needs, and caregivers to describe their unique skills and experience and otherwise differentiate and market themselves in a highly fragmented marketplace; and (b) annual contracts with corporate employers, both to provide access to our suite of products and services as an employee benefit, and to allow businesses to recruit employees and advertise their business profiles. Substantially all of our revenue earned is recognized on a ratable basis over the period the service is provided, with the exception of revenue from individually purchased background checks, which is recognized when the services are delivered to the end customer.
The following are our sources of revenue:
U.S. Consumer Business
Our U.S. Consumer Business consists of our U.S. matching solutions and our payments solutions.
Our U.S. matching solutions provide families access to job posting features, search features, caregiver profiles and content and are offered directly to consumers. Access to this platform is free of charge for basic members. Paying family members pay a monthly, quarterly or annual subscription fee to connect directly with caregivers and to utilize enhanced tools such as third-party background checks. Paying caregiver members pay a subscription fee for priority notification of jobs, messaging services and to perform third-party background checks on themselves. Subscription payments are received from all paying members at the time of sign-up and are recognized on a daily basis over the subscription term as the services are delivered once the revenue recognition criteria are met (see ‘‘Critical Accounting Policies and Estimates’’ in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on March 9, 2017 for a description of the revenue recognition criteria).
28

Our payments solutions provide families several options to manage their financial relationship with their caregiver through the use of household employer payroll and tax services. Revenue related to Care.com HomePay, our household payroll and tax service, is primarily generated through quarterly subscriptions and recognized on a daily ratable basis over the period the services are provided.
Other Revenue
Other revenue includes revenue generated through contracts that provide corporate employers access to certain of our products and services, including on-demand back-up care, through our Care@Work solution. This product offering is typically sold through the use of an annual contract with an automatic renewal clause. Revenue related to this offering is recognized on a daily basis over the subscription term. Additionally, other revenue includes revenue generated from international markets. This revenue is typically recognized on a daily basis over the term of a member’s subscription. We also generate revenue through our marketing solutions offering, which is designed to provide care-related businesses an efficient and cost-effective way to target qualified families seeking care services, and through our recruiting solutions offering, which allows care-related businesses to recruit caregivers for full-time and part-time employment. Revenue related to these product offerings is typically recognized in the period earned.

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages)
Revenue | $ | 44,536 |  |  | $ | 40,791 |  |  | $ | 3,745 |  |  | 9 | % |  | $ | 129,874 |  |  | $ | 118,241 |  |  | $ | 11,633 |  |  | 10 | %

Comparison of the Three Months Ended September 30, 2017 and September 24, 2016
The change was primarily attributed to an increase of $1.7 million in our consumer matching solutions business, principally attributable to a higher number of paying families and caregivers. Additionally, there was a $0.8 million increase in our consumer payment solutions business, a $0.7 million increase in Care@Work, and a $0.6 million increase in background check offerings.
Comparison of the Nine Months Ended September 30, 2017 and September 24, 2016
The change was primarily attributed to an increase of $4.6 million in our consumer matching solutions business, principally related to a higher number of paying families and caregivers. Additionally, there was an increase of $2.9 million in our consumer payment solutions business, an increase of $2.5 million in Care@Work, and an increase of $1.6 million related to background check offerings.
Cost of Revenue
Our cost of revenue primarily consists of expenses that are directly related, or closely correlated, to revenue generation, including matching and payments member variable servicing costs such as personnel costs for customer support, transaction fees related to credit card payments, the cost of background checks run on both families and caregivers and costs associated with back-up care. Additionally, cost of revenue includes website hosting fees and amortization expense related to caregiver relationships, proprietary software acquired as part of acquisitions and website intangible assets. We currently expect cost of revenue to increase on an absolute basis in the near term as we continue to expand our related customer base.

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages)
Cost of revenue | $ | 9,345 |  |  | $ | 8,396 |  |  | $ | 949 |  |  | 11 | % |  | $ | 27,111 |  |  | $ | 23,257 |  |  | $ | 3,854 |  |  | 17 | %
Percentage of revenue | 21 | % |  | 21 | % |  |  |  |  |  | 21 | % |  | 20 | % |  |  |  |

Comparison of the Three Months Ended September 30, 2017 and September 24, 2016
The change was primarily related to increased costs in member servicing and background checks of $0.4 million, credit card fees of $0.3 million, compensation-related costs of $0.2 million, and IT hosting related costs of $0.1 million. These were partially offset by a decrease of $0.1 million related to the amortization costs for intangible assets whose useful life has ended.
29

Comparison of the Nine Months Ended September 30, 2017 and September 24, 2016
The change was primarily related to increased costs in member servicing and background checks of $1.9 million, credit card fees of $1.2 million, and compensation-related costs of $0.8 million. These were partially offset by a decrease of $0.2 million in IT hosting related costs.
Selling and Marketing
Our selling and marketing expenses primarily consist of customer acquisition marketing, including television advertising, branding, other advertising and public relations costs, as well as third-party resources for consulting and allocated facilities and other supporting overhead costs. In addition, sales and marketing expenses include salaries, benefits, stock-based compensation, travel expense and incentive compensation for our sales and marketing employees. We plan to continue to invest in sales and marketing to grow our current customer base, continue building brand awareness, and expand our global footprint.

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages)
Selling and marketing | $ | 17,749 |  |  | $ | 20,075 |  |  | $ | (2,326 | ) |  | (12 | )% |  | $ | 54,799 |  |  | $ | 58,103 |  |  | $ | (3,304 | ) |  | (6 | )%
Percentage of revenue | 40 | % |  | 49 | % |  |  |  |  |  | 42 | % |  | 49 | % |  |  |  |

Comparison of the Three Months Ended September 30, 2017 and September 24, 2016
The change principally related to a reduction in spending on acquisition marketing of $2.8 million, as we continue to focus on unpaid channels. This was partially offset by increases in compensation-related costs of $0.4 million.
Comparison of the Nine Months Ended September 30, 2017 and September 24, 2016
The change was primarily related to a reduction in spending on acquisition marketing of $6.1 million, as we continue to focus on unpaid channels, and a decrease in occupancy expense of $0.2 million. This was partially offset by increases in marketing programs expense and compensation-related costs of $1.9 million and $1.1 million, respectively.
Research and Development
Our research and development expenses primarily consist of salaries, benefits and stock-based compensation for our engineers, product managers and developers. In addition, product development expenses include third-party resources, as well as allocated facilities and other supporting overhead costs. We believe that continued investment in features, software development tools and code modification is important to attaining our strategic objectives and, as a result, we expect product development expense to increase on an absolute basis in the near term.

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages)
Research and development | $ | 6,202 |  |  | $ | 5,115 |  |  | $ | 1,087 |  |  | 21 | % |  | $ | 18,857 |  |  | $ | 15,026 |  |  | $ | 3,831 |  |  | 25 | %
Percentage of revenue | 14 | % |  | 13 | % |  |  |  |  |  | 15 | % |  | 13 | % |  |  |  |

Comparison of the Three Months Ended September 30, 2017 and September 24, 2016
The change was primarily related to increases in third-party resources for consulting expense and compensation-related costs of $0.7 million and $0.3 million, respectively.
Comparison of the Nine Months Ended September 30, 2017 and September 24, 2016
The change was primarily related to increases in third-party resources for consulting expense and compensation-related costs of $2.5 million and $1.4 million, respectively.
General and Administrative
30

Our general and administrative expenses primarily consist of salaries, benefits and stock-based compensation for our executive, finance, legal, information technology, human resources and other administrative employees. In addition, general and administrative expenses include: third-party resources; legal and accounting services; acquisition-related costs; insurance premiums; and facilities. We expect that our general and administrative expenses will increase on an absolute basis in the near term as we continue to expand our business to support our operations as a publicly traded company, including expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission requirements, director and officer insurance premiums and investor relations costs.

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages)
General and administrative | $ | 8,840 |  |  | $ | 7,445 |  |  | $ | 1,395 |  |  | 19 | % |  | $ | 25,528 |  |  | $ | 23,197 |  |  | $ | 2,331 |  |  | 10 | %
Percentage of revenue | 20 | % |  | 18 | % |  |  |  |  |  | 20 | % |  | 20 | % |  |  |  |

Comparison of the Three Months Ended September 30, 2017 and September 24, 2016
The change was primarily related to higher compensation-related costs and third-party resources for consulting expense of $1.4 million and $0.4 million, respectively. These were partially offset by decreases in recruiting costs and other professional fees of $0.2 million and $0.1 million, respectively.
Comparison of the Nine Months Ended September 30, 2017 and September 24, 2016
The change was primarily related to higher compensation related expense of $2.0 million, and to a lesser extent increases in third-party resources for consulting expense, occupancy expense, and IT operations expense of $0.8 million, $0.1 million, and $0.1 million, respectively. These were partially offset by decreases in other professional fees and bad debt expense of $0.4 million and $0.3 million, respectively.
Depreciation and Amortization
Depreciation and amortization expenses primarily consist of depreciation of computer equipment and software and amortization of leasehold improvements and acquired intangibles. We expect that depreciation and amortization expenses will decrease as our business is not capital intensive.

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages)
Depreciation and amortization | $ | 419 |  |  | $ | 582 |  |  | $ | (163 | ) |  | (28 | )% |  | $ | 1,266 |  |  | $ | 2,501 |  |  | $ | (1,235 | ) |  | (49 | )%
Percentage of revenue | 1 | % |  | 1 | % |  |  |  |  |  | 1 | % |  | 2 | % |  |  |  |

31

Comparison of the Three and Nine Months Ended September 30, 2017 and September 24, 2016
The change was primarily attributed to certain intangible assets reaching the end of their useful lives during the prior year. Over the next five years, we expect to incur total annual amortization expense associated with previous acquisitions of $0.8 million.
Restructuring Charges

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages)
Restructuring charges | $ | 2,978 |  |  | $ | — |  |  | $ | 2,978 |  |  | (100 | )% |  | $ | 2,978 |  |  | $ | 714 |  |  | $ | 2,264 |  |  | 317 | %
Percentage of revenue | 7 | % |  | — | % |  |  |  |  |  | 2 | % |  | 1 | % |  |  |  |

Comparison of Three and Nine Months Ended September 30, 2017 and September 24, 2016
During the quarter ended June 25, 2016, we recorded a $0.5 million sublease loss liability and related expenses of $0.2 million for the expected loss on the sublease, in accordance with ASC 840-20 Leases, because the monthly payments we expect to receive under the sublease are less than the amounts that we will owe the lessor for the sublease space. During the quarter ended September 30, 2017, we recorded a lease obligation charge of $3.0 million, as we met the cease-use date requirements for that portion of the facility. In order to estimate the lease obligation charges included in the restructuring expense, we made certain assumption, including the time period it will take to obtain a subtenant and certain sublease rates.
Other Income (Expense)
Other income (expense) consists primarily of foreign exchange gains and losses, net of the interest income earned on our cash and cash equivalents and investments.

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages) |  |  |  |  |  |  |  |
Other income (expense), net | $ | 612 |  |  | $ | (67 | ) |  | $ | 679 |  |  | (1,013 | )% |  | $ | 1,921 |  |  | $ | (210 | ) |  | $ | 2,131 |  |  | (1,015 | )%
Percentage of revenue | 1 | % |  | — | % |  |  |  |  |  | 1 | % |  | — | % |  |  |  |

Comparison of the Three and Nine Months Ended September 30, 2017 and September 24, 2016
The change was primarily driven by the favorable movement of foreign exchange rates, primarily due to the weakening of the US dollar against the Euro and British Pound Sterling during the three and nine months ended September 30, 2017 compared to the three and nine months ended September 24, 2016.
Provision (Benefit) for Income Taxes
Provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions.
32

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages)
(Benefit from) provision for income taxes | $ | (647 | ) |  | $ | 332 |  |  | $ | (979 | ) |  | (295 | )% |  | $ | (1,503 | ) |  | $ | 952 |  |  | $ | (2,455 | ) |  | (258 | )%
Percentage of revenue | (1 | )% |  | 1 | % |  |  |  |  |  | (1 | )% |  | 1 | % |  |  |  |

Comparison of the Three Months Ended September 30, 2017 and September 24, 2016
The change was partially related to the tax expense pertaining to amortization of goodwill associated with the acquisition of Care.com HomePay for tax purposes, for which there is no corresponding book deduction, and certain state taxes based on operating income that are payable without regard to tax loss carryforwards. These expenses were primarily offset by excess tax benefits recorded from the taxable compensation on share-based awards.
Comparison of the Nine Months Ended September 30, 2017 and September 24, 2016
The change was primarily related to the excess tax benefits from the taxable compensation on share-based awards, partially offset by tax expense pertaining to amortization of goodwill associated with the acquisition of Care.com HomePay for tax purposes, and certain state taxes based on operating income that are payable without regard to tax loss carryforwards.
(Loss) Income from Discontinued Operations, Net of Taxes

| Three Months Ended |  | Period-to-Period Change |  | Nine Months Ended |  | Period-to-Period Change
| September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change |  | September 30, 2017 |  | September 24, 2016 |  | $ Change |  | % Change
| (in thousands, except percentages) |  |
Loss (income) from discontinued operations, net of tax | $ | — |  |  | $ | (49 | ) |  | $ | 49 |  |  | (100 | )% |  | $ | — |  |  | $ | 7,785 |  |  | $ | (7,785 | ) |  | (100 | )%
Percentage of revenue | — | % |  | — | % |  |  |  |  |  | — | % |  | 7 | % |  |  |  |

Comparison of the Three and Nine Months Ended September 30, 2017 and September 24, 2016
The decrease was related to a settlement agreement with the previous shareholders of Citrus Lane. The settlement agreement related to our acquisition of Citrus Lane and the merger agreement pursuant to which the acquisition was consummated. Under the terms of the settlement agreement, we paid the previous shareholders of Citrus Lane $15.6 million for contingent consideration payments that were fair valued at $16.0 million as of December 26, 2015 that was otherwise payable to them in the event Citrus Lane achieved certain milestones in 2015 and 2016. In connection with the settlement, the former shareholders forfeited the $5.0 million in original cash consideration that was being held in an escrow account, as well as the 0.4 million shares of common stock issued at closing (valued at $2.0 million as of the settlement date and $3.9 million as of the original closing date) and 0.1 million shares of common stock which was subject to the achievement of certain milestones in 2015 and 2016 (valued at $0.6 million as of the settlement date and $1.1 million as of the original closing date) offered as part of the deal consideration. As a result of this settlement, we recognized a gain within income from discontinued operations on the consolidated statements of operations for the three months ended March 26, 2016 of $8.0 million. We completed the closure of the Citrus Lane business in the fourth quarter of fiscal 2016.
33

Liquidity and Capital Resources
The following table summarizes our cash flow activities for the periods indicated (in thousands)

| Nine Months Ended
| September 30, 2017 |  | September 24, 2016
Cash flow provided by (used in): |  |  |
Operating activities - continuing operations | $ | 21,278 |  |  | $ | 7,557 |
Operating activities - discontinued operations | — |  |  | 2,441 |
Investing activities - continuing operations | (566 | ) |  | (15,572 | )
Financing activities - continuing operations | 2,600 |  |  | 14,814 |
Financing activities - discontinued operations | — |  |  | (14,510 | )
Effect of exchange rates on cash balances | (2,939 | ) |  | (137 | )
Increase (decrease) in cash and cash equivalents | $ | 20,373 |  |  | $ | (5,407 | )

As of September 30, 2017, we had cash and cash equivalents and short-term investments of $96.4 million, which consisted of $81.4 million in cash and cash equivalents and $15.0 million in short-term investments. Cash and cash equivalents and short-term investments consist of cash, certificates of deposit, and money market funds. Cash held internationally as of September 30, 2017 was $7.2 million. We did not have any long-term investments. Additionally, we do not have any outstanding bank loans or credit facilities in place. To date, we have been able to finance our operations through proceeds from the public and private sales of equity, including our IPO in January 2014. We believe that our existing cash and cash equivalents balance will be sufficient to meet our working capital expenditure requirements for at least the next 12 months. From time to time, we may explore additional financing sources to develop or enhance our services, to fund expansion, to respond to competitive pressures, to acquire or to invest in complementary products, businesses or technologies, or to lower our cost of capital, which could include equity, equity-linked and debt financing. We cannot assure you that any additional financing will be available to us on acceptable terms, if at all.
Operating Activities
Our primary source of cash from operations was from ongoing subscription fees to our consumer matching solutions. We believe that cash inflows from these fees will grow from our continued penetration into the market for care.
Nine Months Ended September 30, 2017
Cash from operating activities by continuing operations provided $21.3 million during the nine months ended September 30, 2017. This amount resulted from a net income from continuing operations of $2.8 million, adjusted for non-cash items of $8.8 million, and a net $9.7 million source of cash due to changes in working capital.
Non-cash expenses within net income consisted primarily of $6.6 million for stock-based compensation, $1.7 million of depreciation and amortization expense, $1.7 million of foreign currency remeasurement gain. This was partially offset by $1.6 million of deferred taxes.
Increases in operating liabilities and operating assets resulted in a net source of $9.7 million of cash within operating activities. The increase in working capital was primarily due to increases in accrued expenses and other current liabilities, deferred revenue, and other non-current liabilities of $7.3 million, $3.5 million, and $1.2 million, respectively. These were partially offset by increases prepaid expense and other current assets and accounts receivable of $1.4 million and $1.3 million, respectively.
Nine Months Ended September 24, 2016
Cash from operating activities by continuing operations provided $7.6 million during the nine months ended September 24, 2016. This amount resulted from a net loss from continuing operations of $5.7 million, adjusted for non-cash items of $8.9 million, and a net $4.4 million source of cash due to changes in working capital.
Non-cash expenses within net income consisted primarily of $4.8 million for stock-based compensation and $3.1 million of depreciation and amortization expense.
Increases in operating liabilities and decreases operating assets resulted in a net source of $4.4 million of cash within operating activities. The increase in working capital was primarily due to an increase in deferred revenue, accrued expenses and other current liabilities, and other non-current liabilities of $3.5 million, $2.2 million, and $1.0 million, respectively. These were partially offset by decreases in prepaid expenses and other current assets, unbilled accounts receivable, accounts receivable of $1.0 million, $0.6 million, and $0.5 million, respectively.
34

Cash provided by discontinued operations totaled $2.4 million. This amount resulted from a net income from discontinued operations of $7.8 million, partially offset by a net $5.4 million use of cash from changes in working capital and non-cash related adjustments.
Investing Activities
Nine Months Ended September 30, 2017
Cash used in investing activities totaled $0.6 million, which was primarily related to the purchases of property and equipment. During the three months ended September 24, 2016, we purchased $15.0 million of short term investments. These matured in the first half of 2017, and the $15.0 million was reinvested.
Nine Months Ended September 24, 2016
Cash used in investing activities totaled $15.6 million, primarily related to the purchase of short-term investments of $15.0 million, the purchase of Kinsights Inc., the developer and operator of an online community platform and service, for $0.4 million and purchases of property and equipment of $0.2 million. We are not currently a party to any material purchase contracts related to future purchases of property and equipment.
Financing Activities
Nine Months Ended September 30, 2017
Cash provided by financing activities for continued operations totaled $2.6 million, which was attributed to the exercise of common stock options.
Nine Months Ended September 24, 2016
Cash provided by financing activities for continued operations totaled $14.8 million, primarily related to the net cash proceeds received from the issuance of the Series A Preferred Stock of $44.2 million and the exercise of common stock options of $1.1 million. This was off-set by the repurchase of common stock for $30.5 million.
Cash from financing activities for discontinued operations used $14.5 million related to the payment associated with the Citrus Lane settlement.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. 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.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K of the Securities and Exchange Commission, in the nine months ended September 30, 2017 and September 24, 2016.
Contractual Obligations
Our contractual obligations relate primarily to non-cancelable operating leases. There have been no significant changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, except as set forth below.
In August 2017, we entered into an approximate 2-year property lease. The lease commenced on September 1, 2017, and we will pay an aggregate of approximately $0.7 million over the 2-year lease period.
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.
35

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, principally the Euro, the British pound sterling, the Canadian dollar and the Swiss franc. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in our net loss as a result of transaction gains (losses) related to revaluing certain cash balances, trade accounts receivable balances and accounts payable balances that are denominated in currencies other than the U.S. dollar. In the event our foreign currency denominated cash, accounts receivable, accounts payable, sales or expenses increase, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. A hypothetical change of 10% in appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchange rates at September 30, 2017 would not have a material impact on our revenue, operating results or cash flows in the coming year.
At this time we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the impact hedging activities would have on our results of operations.
Interest Risk
We did not have any long-term borrowings as of September 30, 2017 or September 24, 2016. Under our current investment policy, we invest our excess cash in money market funds and certificates of deposit. Our current investment policy seeks first to preserve principal, second to provide liquidity for our operating and capital needs and third to maximize yield without putting our principal at risk. Our investments are exposed to market risk due to the fluctuation of prevailing interest rates that may reduce the yield on our investments or their fair value. As our investment portfolio is short-term in nature, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our results of operations or cash flows to be materially affected to any degree by a sudden change in market interest rates.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
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 the end of the period covered by this Quarterly Report on Form 10-Q. 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, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions’ rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures 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 accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
In addition, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the third fiscal quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
36

PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we are involved in legal proceedings arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that there is no litigation pending that is likely to have a material adverse effect on our business. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Information pertaining to legal proceedings can be found in “Item 1. Financial Statements and Supplementary Data” and “Note 5, Contingencies” of this Quarterly Report on Form 10-Q, and is incorporated by reference herein.
ITEM 1A. RISK FACTORS
There have not been any material changes to the risk factors affecting our business, financial condition or future results from those set forth in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 9, 2017. However, you should carefully consider the factors discussed in our Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 6. EXHIBITS

|  |  |  |  |  | Incorporated by Reference
Exhibit Number |  | Exhibit Description |  | Filed with this Form 10-Q |  | Form |  | Filing Date with SEC |  | Exhibit Number
31.1 |  | Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. |  | X |  |  |  |  |  |
31.2 |  | Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. |  | X |  |  |  |  |  |
32.1 |  | Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350. |  | X |  |  |  |  |  |
101.INS |  | XBRL Instance Document |  | X |  |  |  |  |  |
101.SCH |  | XBRL Taxonomy Schema Linkbase Document |  | X |  |  |  |  |  |
101.CAL |  | XBRL Taxonomy Calculation Linkbase Document |  | X |  |  |  |  |  |
101.DEF |  | XBRL Taxonomy Definition Linkbase Document |  | X |  |  |  |  |  |
101.LAB |  | XBRL Taxonomy Labels Linkbase Document |  | X |  |  |  |  |  |
101.PRE |  | XBRL Taxonomy Presentation Linkbase Document |  | X |  |  |  |  |  |

37

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.

|  |  | CARE.COM, INC.
Dated: November 2, 2017 |  |  | By: /s/ SHEILA LIRIO MARCELO
|  |  | Sheila Lirio Marcelo
|  |  | President and Chief Executive Officer and Director
|  |  | (Principal Executive Officer)
Dated: November 2, 2017 |  |  | By: /s/ MICHAEL ECHENBERG
|  |  | Michael Echenberg
|  |  | Executive Vice President and Chief Financial Officer
|  |  | (Principal Financial and Accounting Officer)

38