Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Active and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes technology revenue primarily from registration fees and related hosting and implementation services. Technology revenue also includes software licensing, training services, software maintenance fees and revenue from the sale of pre-purchased registrations. Technology revenue was 88%, 86%, and 85% of total revenue for the years December 31, 2012, 2011, and 2010, respectively. The Company also records revenue for marketing services which primarily consists of online and integrated field marketing campaigns and membership programs. Marketing revenue was 12%, 14%, and 15% of total revenue for the years ended December 31, 2012, 2011, and 2010, respectively.

The Company recognizes revenue when a signed contract or other persuasive evidence of an arrangement exists, the services have been rendered, the fee is fixed or determinable, and collection of the resulting receivable is probable. The Company’s arrangements do not contain general rights of return.

The Company assesses whether the fee is fixed or determinable, and collection is probable, at the time of the transaction. In determining whether the fee is fixed or determinable, the Company compares the payment terms of the transaction to its standard payment terms and whether payment is free of contingencies or significant uncertainties. If a significant portion of the fee is considered to have extended payment terms or the fee is subject to adjustment, the Company accounts for the fee as not being fixed or determinable and recognizes revenue as the payments become due. The Company assesses whether collection is probable based on a number of factors, including the customer’s past transaction history and credit-worthiness. The Company does not request collateral from its customers. If the Company determines that collection of a fee is not probable, the Company defers the fee and recognizes revenue at the time collection becomes probable, which is generally upon receipt of cash.

The Company also enters into multiple element revenue arrangements in which a customer may purchase a combination of hosting, implementation, training, and maintenance services. Revenue arrangements with multiple deliverables are divided into separate units and the arrangement consideration is allocated to all deliverables based on the relative selling price method. In such circumstances, the Company uses the selling price hierarchy of (i) vendor specific objective evidence of fair value (“VSOE”) if available,(ii) third-party evidence of selling price (“TPE”) if VSOE is not available, and (iii) best estimate of selling price (“BESP”), if neither VSOE nor TPE is available. VSOE generally exists when the Company sells the deliverable separately as it is limited to the price charged when the same element is sold separately. Due to the unique nature of some of the Company’s multiple deliverable revenue arrangements, the Company may not be able to establish selling prices based on historical stand-alone sales using VSOE or TPE, therefore the Company may use its best estimate to establish selling prices for these arrangements. The Company establishes its best estimates within a range of selling prices considering multiple factors including, but not limited to, customer base, size of transaction, customer demand, historic Company contractually stated prices and the Company’s price lists.

Significant management judgments and estimates are made in connection with determination of the revenue to be recognized in any accounting period. If the Company makes different judgments or utilized different estimates for any period, material differences in the amount and timing of revenue recognized could result.

Technology Revenue

The Company generally recognizes registration revenue when received, net of registration fees paid to event organizers, refunds, and chargebacks, where the Company is acting as an agent of event organizers. Net registration revenue comprised 66%, 67%, and 71% of total net revenue for fiscal years 2012, 2011 and 2010, respectively.

In certain circumstances, the Company pre-purchases registrations from event organizers. The decision to record revenue gross versus net is a matter of significant judgment that is dependent upon the relevant facts and circumstances. The Company evaluates the presentation of revenue on a gross or net basis based on the qualitative weight of various indicators in the authoritative accounting guidance in order to determine whether the Company recognizes (a) the gross amount billed to a customer because it has earned revenue from the sale of the goods or service or (b) the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier because it has earned a commission or fee). Registration revenue associated with pre-purchased registration transactions is recorded on a gross basis at the time the event occurs, as the Company bears inventory risk, has latitude in establishing price, bears credit risk and assumes many of the responsibilities of the primary obligor, except for the actual fulfillment of the event.

For the sale of pre-purchased registrations recorded on a gross basis, cash collected prior to an event is recorded as deferred revenue until the event occurs. Revenue recognized on a gross basis associated with these transactions comprised 1.6%, 0.7% and 0% of total net revenue for fiscal years 2012, 2011 and 2010, respectively.

Many customers who use the Company’s hosting services or license its software also enter into professional services and training arrangements with the Company. In addition, certain of the Company’s hosting agreements include up-front fees for implementation of hosting services. In determining whether professional services and implementation revenue should be accounted for separately, the Company evaluates (among other factors): the nature of the deliverables; whether they are ready for their intended use by the customer upon receipt; the nature of the implementation services; the availability of services from other vendors; whether the timing of payments for license revenue is coincident with performance of services and whether milestones or acceptance criteria exist that affect the realizability of the hosting or software license fee.

For hosting arrangements with up-front fees received for implementation services where the hosting and implementation do not have stand-alone value, the Company defers the related revenue and records revenue as a single unit over the term of the hosting contract.

For license and professional services that qualify for separate accounting, such as arrangements that involve off-the-shelf software, the services do not include significant alterations to the features and functionality of the software, the services are primarily comprised of implementation services and fair value exists for the undelivered elements, software revenue is generally recognized when the software is delivered and service revenue is recognized when the services are performed.

For license and professional service arrangements that do not qualify for separate accounting, such as arrangements that involve significant modification or customization of the software, arrangements that include milestones or customer specific acceptance criteria, or where payment for the software license is tied to the performance of professional services, software license revenue is generally recognized together with the professional services revenue when services have been rendered.

Maintenance revenue consists of fees for providing software updates on a when-and-if available basis and technical support to software products (“post contract customer support” or “PCS”). Maintenance revenue is recognized ratably over the term of the agreement.

Penalties from customers related to power outages or other technical disruptions are recognized in the period in which such amounts are incurred based on the Company’s estimated liability and are recorded as a reduction of revenue or an increase to cost of revenue.

Marketing Revenue

Marketing services revenue consists of online and integrated field marketing campaigns and membership programs. The Company’s online marketing services include online advertising, e-mail marketing and targeted newsletter promotions. Banner, button and e-mail advertisements are impression-based, with the revenue based on the number of times the advertisement is displayed or delivered over the contract period. Impression-based contract revenue is primarily recognized as the impression is displayed on the Company’s web site or delivered by e-mail to the intended addressee. The Company’s field marketing services include event promotions, sponsorships and sample placements and are defined contractually with individual customers. Field marketing revenue is recognized over the term of the contract or when revenue is earned based on the performance of services associated with a series of events. Revenue from membership programs is recognized over the term of the membership period.

Fair Value of Financial Instruments

Carrying amounts of the Company’s financial instruments including accounts receivable, inventories, prepaid expenses and other current assets, accounts payable, registration fees payable and accrued liabilities approximate fair value due to their short maturities. Carrying amounts of the Company’s acquisition-related notes payable, term loans and line of credit approximate fair value as the interest rates on these instruments are primarily based on market rates of interest. The fair value of acquisition-related contingent consideration issued is detailed further in Note 5.

Concentration of Credit Risk

The Company’s cash, cash equivalents and accounts receivable are potentially subject to concentration of credit risk. Cash and cash equivalents are deposited with financial institutions that management believes are creditworthy. As of December 31, 2012 and 2011, substantially all of the Company’s cash has been deposited in non-interest bearing accounts. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based on various factors, including the Company’s review of credit profiles of its customers, contractual terms and conditions, current economic trends and historical payment experience (Note 6).

Cash and Cash Equivalents

The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. Management determines the appropriate classification of marketable securities at the time of purchase and evaluates such designation as of each balance sheet date.

Restricted Cash

At December 31, 2012 and 2011, the Company had $1.1 million and $1.5 million, respectively, of cash restricted from withdrawal and held by banks as collateral for letters of credit.

Registration Fees Receivable

Registration fees receivable represent amounts due from payment processors for credit card transactions processed for our customers. Registration fees receivable includes the Company’s technology fee and the registration fees payable our customers.

Accounts Receivable

Accounts receivable includes trade accounts receivables from the Company’s invoiced customers.

Inventories

Inventories are stated at the lower of cost or market on a first in, first out (“FIFO”) basis. Inventories are comprised of pre-purchasesd registrations from event organizers for customer activities and events that are intended to be sold directly to end-user participants. The Company reviews its inventory for estimated excess inventory based on estimated future usage and sales. Inventory reserves are established based upon such judgments for any inventories that are identified as having a net realizable value less than their cost, which is further reduced by related selling expenses. Whenever inventory is written down, a new cost basis is established and the inventory is not subsequently written up if conditions improve.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally two to five years.

Significant improvements which substantially extend the useful lives of assets are capitalized. Amortization of leasehold improvements is computed using the shorter of the estimated useful lives or the terms of their respective leases, generally one to nine years. Expenditures for maintenance and repairs are charged to expense as incurred.

Assets held under capital leases are recorded at the net present value of the minimum lease payments of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease and is included in depreciation expense.

Capitalized Software Development Costs

Costs to develop internal use software are capitalized provided these costs are expected to be recoverable, and are amortized on a product-by-product basis using the straight-line method over the estimated economic life of the application, which is generally two to five years, beginning when the asset is substantially ready for use. Costs incurred during the preliminary development stage, as well as maintenance and training costs are expensed as incurred. The Company capitalized software development costs of $23.5 million, $18.7 million, and $15.7 million for the years ended December 31, 2012, 2011 and 2010, respectively. Amortization of internal software development costs is reflected in cost of revenue.

Business Combinations

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets. While the Company uses its best estimates and assumptions as a part of the determination of fair value to accurately value assets acquired and liabilities assumed on the business combination date, the Company’s estimates and assumptions are inherently subject to refinement. As a result, during the preliminary determination of fair value, which may be up to one year from the business combination date, the Company records adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. After the completion of the determination of fair value, the Company records adjustments to the assets acquired or liabilities assumed subsequent to the completion of the determination of fair value in the Company’s operating results in the period in which the adjustments were determined.

The Company also incurs acquisition-related and other expenses including legal, banker, accounting and other advisory fees of third parties and severance costs for certain employees of the acquired company that were terminated as of the acquisition date which are recorded as an expense in general and administrative expenses.

Goodwill

Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually or as circumstances indicate that their value may no longer be recoverable. The Company does not have intangible assets with indefinite useful lives other than goodwill. Goodwill impairment testing is a two-step process: first, the Company tests for impairment, and if any possible impairment exists, undertakes a second step of measuring such impairment. The Company performs its goodwill impairment test annually in its fourth fiscal quarter, and more frequently if events or changes in circumstances occur that indicate a potential reduction in the fair value of our reporting units are below their respective carrying values. Examples of such events or circumstances include: a significant adverse change in legal factors or in the business climate, a significant decline in our stock price, a significant decline in our projected revenue or cash flows, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, or the presence of other indicators that would indicate a reduction in the fair value of a reporting unit. To date we have not performed an interim impairment test and the last impairment test was as of October 1. The guidance for goodwill and other intangible assets requires impairment testing based on reporting units. The Company periodically re-evaluates its business and has determined that it operates in two segments, which the Company also considers its reporting units given the similarities in economic characteristics between our operations and the common nature of our products, services and customers within each segment. Therefore, goodwill is tested at the reporting unit level.

For purposes of goodwill impairment testing, the Company estimates its fair value using generally accepted valuation methodologies, including market and income based approaches, and relevant data available through and as of the testing date. The market approach is a valuation method in which fair value is estimated based on observed prices in actual transactions and on asking prices for similar assets. Under the market approach, the valuation process is essentially that of comparison and correlation between the subject asset and other similar assets. The income approach is a method in which fair value is estimated based on the cash flows that an asset could be expected to generate over its useful life, including residual value cash flows. These cash flows are then discounted to their present value using a rate of return that accounts for the relative risk of not realizing the estimated annual cash flows and for the time value of money. To date, the Company has determined that there has been no impairment of goodwill.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets which includes amortizable intangible and tangible assets in accordance with authoritative guidance on accounting for the impairment or disposal of long-lived assets. Acquired intangible assets with definite useful lives are amortized over their useful lives. The Company evaluates long-lived assets, other than goodwill, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The Company recognizes such impairment in the event the net book value of such assets exceeds their fair value. No long-lived assets impairment losses were incurred in the fiscal periods presented.

Penalty Accruals

In the normal course of business, the Company may incur penalties from customers related to power outages or various technical disruptions. The Company records a liability, on a contract-by-contract basis, for specific matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. The Company subsequently reduces the liability as these matters are settled. Penalties are reflected as a reduction in revenue or as an increase in cost of revenue in the Company’s consolidated statement of operations.

Registration Fees Payable

Registration fees payable represent the portion of the registration fees payable to event organizers, park and recreation department administrators, league administrators and other customers. Cash collected on behalf of customers are included in cash and cash equivalents prior to remitting the amounts owed to the Company’s customers.

Deferred Revenue

Deferred revenue represents amounts received from customers in advance of the delivery or performance of products and/or services or before the satisfaction of all revenue recognition requirements. Costs directly attributable to the deferred revenue are also deferred until the related revenue is recognized.

Stock-Based Compensation

Stock based compensation expense is comprised of stock options, stock options with market conditions (“Market Stock Options”), restricted stock units with service conditions (“RSUs”), restricted stock units with market conditions (“MSUs”), and performance-based restricted stock units (“PRSUs” or “Performance RSUs”) which are issued under the Company’s 2002 and 2011 equity incentive plans, as well as common stock issued under the Employee Stock Purchase Plan (“ESPP”). The ESPP allows eligible officers and employees to purchase a limited amount of common stock at a discount to the market price in accordance with the terms of the plan as described in Note 16 of the Company’s consolidated financial statements.

Stock Options and ESPP

Stock-based compensation related to stock options and ESPP is measured at the grant date based on the fair value of the award and is recognized as expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. The Company utilizes the Black-Scholes pricing model for determining the estimated fair value of our stock options and the common stock issued under the ESPP. The Black-Scholes pricing model requires the use of subjective assumptions including the option’s expected term, the price volatility of the underlying stock and the expected forfeiture rate.

RSUs

Stock-based compensation cost for restricted stock awards is recognized using the closing price of the stock on the grant date as the fair value, net of an estimate for pre-vesting forfeitures, and recognize the expense over the indicated service period of the award.

Market Stock Options and MSUs

Stock-based compensation related to market stock options and MSUs is measured using the Monte Carlo simulation model which estimates the potential outcome of reaching the market condition based on simulated future stock prices and is recognized over the requisite service period. The input factors used in the valuation model are based on subjective future expectation combined with management judgment.

Performance RSUs

Compensation cost for awards with performance conditions is recognized when the performance conditions have been determined and based upon the probability of that performance condition being met, net of an estimate for pre-vesting forfeitures, at the closing market price on the date of the grant.

Income Taxes

The Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

The Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. If it is more likely than not that the Company will not recover its deferred tax assets, the Company will increase its provision for taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable.

The Company’s income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service and other tax authorities. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of examinations by tax authorities in determining the adequacy of its provision for income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known.

Advertising Expense

Advertising costs are expensed as they are incurred. The Company incurred advertising costs of approximately $3.7 million, $3.3 million and $2.2 million for years ended December 31, 2012, 2011 and 2010, respectively. Advertising costs are included in sales and marketing on the consolidated statements of operations.

Foreign Currencies

The functional currency for the majority of the Company’s foreign subsidiaries is the local currency. For those subsidiaries, the assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average exchange rates for the period. Certain foreign subsidiaries designate the U.S. dollar as the functional currency. For those subsidiaries, assets and liabilities denominated in foreign currency are remeasured into U.S. dollars at current exchange rates for monetary assets and liabilities and historical exchange rates for nonmonetary assets and liabilities. Foreign currency translation adjustments are included in accumulated other comprehensive income as a separate component of stockholders’ equity (deficit) or in other income (expense) in the consolidated statements of operations.

Foreign currency exchange gains and losses are recorded in other income (expense), net. Foreign currency transaction gains and losses were $0.1 million, $0.1 million and $0.3 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Comprehensive Loss

Comprehensive loss consists of two components, net loss and other comprehensive loss. Other comprehensive loss refers to revenue, expenses, gains and losses that under U.S. generally accepted accounting principles are recorded as an element of stockholders’ equity (deficit) but are excluded from net loss. The Company’s other comprehensive loss consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency. The Company has disclosed comprehensive loss as a component of stockholders’ equity (deficit).

Reclassification

Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the 2012 presentation. The Company reclassified deferred tax assets previously included in deferred tax liability to prepaid expenses and other current assets, in the consolidated financial statements for the period ended December 31, 2011 resulting in an increase in current assets and a corresponding increase in deferred tax liability of $1.3 million.