Description of Business and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Fair Value Disclosures [Abstract] | ' |
Reverse Stock Split | ' |
Reverse Stock Split |
Prior to our Initial Public Offering (“IPO”), our Board of Directors and holders of the requisite number of outstanding shares of our capital stock approved an amendment to our restated certificate of incorporation to effect a 5-for-1 reverse stock split of our outstanding capital stock. The reverse stock split was effected on February 11, 2013. The reverse stock split did not result in an adjustment to par value. The reverse stock split is reflected in the accompanying consolidated financial statements and related notes on a retroactive basis for all periods presented. |
Initial Public Offering | ' |
Initial Public Offering |
In March 2013, we completed our IPO in which we issued and sold 5,462,500 shares of common stock at a public offering price of $17.00 per share. We received net proceeds of $84.2 million after deducting underwriting discounts and commissions of $6.5 million and paid offering costs in the year ended December 31, 2013 of $2.2 million, but before deducting previously paid offering expenses of approximately $4.2 million. Concurrently with our IPO, we issued and sold in a private placement 705,881 shares of common stock at the public offering price of $17.00 per share, which resulted in net proceeds of $12.0 million. In addition, in connection with our IPO: |
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| • | | All of our outstanding convertible preferred stock converted into 32,406,995 shares of common stock. | | | | | | | | | |
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| • | | Our $24.0 million and $30.0 million convertible notes together with contractual accrued interest of $2.3 million converted into 3,764,954 shares of common stock. In connection with the conversion, we recorded a loss on debt extinguishments of $22.9 million. Please see Note 5 Borrowings for further discussion on the conversion features of the convertible notes, the calculation of the number of shares into which the notes were converted and the accounting for debt extinguishment. | | | | | | | | | |
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| • | | We reduced our preferred stock warrant liability by $11.2 million and recorded a loss of $0.8 million in the year ended December 31, 2013 resulting from our payment of $12.0 million as consideration for the termination of certain warrants to purchase shares of Series A preferred stock and all warrants to purchase shares of Series C preferred stock, which occurred immediately prior to the effectiveness of our IPO. Please see Note 7 Convertible Preferred Stock and Preferred Stock Warrants. | | | | | | | | | |
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| • | | We reclassified the preferred stock warrant liability for the surviving warrant to purchase shares of Series A preferred stock and all warrants to purchase shares of Series E preferred stock to additional paid-in capital, as these warrants converted to warrants to purchase shares of common stock. Please see Note 7 Convertible Preferred Stock and Preferred Stock Warrants. | | | | | | | | | |
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| • | | We recognized stock-based compensation expense of $4.4 million in the year ended December 31, 2013 upon the issuance of 87,507 shares of common stock following the vesting upon the effectiveness of the Registration Statement on Form S-1 of 87,507 restricted stock units previously granted in connection with our incentive bonus plans. Please see below—Corporate Bonus Incentive Plan for further discussion of this stock-based compensation expense. | | | | | | | | | |
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| • | | We recognized stock-based compensation expense of $10.2 million in the year ended December 31, 2013 upon the issuance of 602,274 shares of common stock following the granting upon the effectiveness of the Registration Statement on Form S-1 of 602,274 fully vested restricted stock units in connection with our incentive bonus plans. Please see below—Corporate Bonus Incentive Plan for further discussion of this stock-based compensation expense. | | | | | | | | | |
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| • | | We recognized stock-based compensation expense of approximately $4.7 million in the year ended December 31, 2013 related to the modification of stock options held by current employees. Please see Note 9 Stock-Based Compensation for further discussion of this stock-based compensation expense. | | | | | | | | | |
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| • | | We reclassified $6.4 million of deferred issuance costs previously recorded in other long-term assets as an off-set to the equity proceeds in connection with our IPO. | | | | | | | | | |
Accounting Principles and Basis of Presentation | ' |
Accounting Principles and Basis of Presentation |
The consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The consolidated financial statements include the accounts of Silver Spring Networks, Inc. and its wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and revenue and expenses during the reporting period. Estimates are used for revenue and cost recognition, inventory valuation, warranty obligations, preferred stock warrants and embedded derivatives valuations, stock-based compensation, classification of current and non-current deferred revenue and deferred cost of revenue, income taxes and deferred income tax assets and associated valuation allowances. These estimates generally involve complex issues and require judgments, involve the analysis of historical and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from management’s estimates. |
Cash, Cash Equivalents and Short-term Investments | ' |
Cash, Cash Equivalents and Short-term Investments |
Cash equivalents consist of highly liquid investments with insignificant interest rate risk and original or remaining maturities at the time of purchase of three months or less, and consist of money market funds. Short-term investments consist of high investment grade securities with original or remaining maturities at the time of purchase of greater than three months, and are available for use in current operations. We classify all of our cash equivalents and short-term investments as available-for-sale, which are recorded at fair value. Unrealized gains and losses are included in accumulated other comprehensive income (loss) in stockholders’ deficit. Realized gains and losses are included in other income and expense, net. Determining whether a decline in fair value is other-than-temporary requires management judgment based on the specific facts and circumstances of each security. We evaluate our short-term investments for impairment each reporting period. Amounts are reclassified out of accumulated other comprehensive income (loss) into earnings using the specific identification method. |
Inventory | ' |
Inventory |
Inventory is stated at the lower of cost or market. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. The determination of market value involves numerous judgments including estimated average selling prices based upon recent sales volumes, industry trends, existing customer orders and current contract prices. We evaluate our ending inventories for excess quantities and obsolescence based on forecasted demand within specific time horizons, technological obsolescence, and an assessment of any inventory that is not of saleable condition. Forecasted demand requires management estimates and is subject to several uncertainties including market and economic conditions, technology changes and new product introductions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values and operating results. |
In addition, we enter into purchase commitments with third-party contract manufacturers to manage lead times and meet product forecasts and with other parties to purchase various key components used in the manufacture of our products. Accruals are established for estimated losses on purchased components for which we believe it is probable that they will not be recoverable in future operations. To the extent that such forecasts are not achieved, commitments and associated accruals may change. |
Revenue Recognition | ' |
Revenue Recognition |
We generally market our products and services for our advanced metering, distribution automation and demand-side management solutions directly to customers. For our advanced metering solution, we contract with third-party device manufacturers, which integrate our communications modules into their meters. Our advanced metering solution, which includes our UtilOS network operating system, UtilityIQ software suite, networking hardware, and communications modules, provides utilities with two-way communication from our communications modules to the utility’s back office. Our hardware devices include UtilOS embedded software, which functions together with the tangible hardware elements to deliver the tangible products’ essential functionality. Our UtilityIQ software suite of products includes software that is not embedded with the tangible hardware elements, but that is also necessary to deliver the tangible products’ essential network functionality, as well as other application software that provides additional functionality to the network solution. We derive revenue from sales of products, including hardware and software, as well as services, including network design and deployment support, managed services and SaaS, and ongoing customer support. We enter into separate arrangements with third party device manufacturers to integrate our communications modules with their meters pursuant to our customers’ specifications. While we may receive payment directly from these third party device manufacturers, the timing of revenue recognition related to communications modules delivered to third party device manufacturers is ultimately determined based upon acceptance by our customers. Substantially all of our sales of communications modules have been fulfilled through third party device manufacturers in this manner. |
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We enter into multiple deliverable arrangements with customers to deploy our networking platform and solutions, which include the delivery of hardware and software, as well as services. |
Judgment is required in determining the separate units of accounting, which depends on whether the delivered items have standalone value to customers. When we sell or could sell our products and services separately, or when the customer could resell them on a standalone basis, we treat the delivered elements as having standalone value. In our typical customer arrangements, we consider the following to be separate units of accounting: our hardware together with the related embedded software; our network management software; and our service offerings, which include professional services, managed services and SaaS, and ongoing customer support. |
We determine total arrangement consideration, and exclude amounts that are contingent upon the delivery of additional items or meeting other specified performance conditions, including potential refunds or penalty provisions. We allocate the total arrangement consideration to the deliverables based on our determination of the units of accounting and their relative selling prices. As we have not yet established vendor-specific objective evidence or VSOE or identified third-party evidence of fair value for these units of accounting, we use our best estimate of selling price to perform the relative fair value allocation. Judgment is also required in determining how to measure and allocate arrangement consideration among the separate units of accounting. The process for performing an assessment of our best estimate of selling price for our products and services is based on quantitative and qualitative aspects of multiple factors. These factors include market conditions, such as competitive alternatives and pricing practices, as well as company-specific factors, such as standalone sales, nature and size of the customer, contractually stated prices, costs to manufacture products or provide services and profit objectives. In establishing such profit objectives, we consider prices in previous contracts, size of the transaction, and the drivers, if any, that could influence future margins. |
The following revenue recognition criteria are applied to the units of accounting in all utility customer arrangements, as well as those in which orders of communications modules are fulfilled through third party device manufacturers as described above. We do not recognize revenue for a unit of accounting until all of the following criteria have been met: |
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| • | | Persuasive evidence of an arrangement exists. Binding contracts or purchase orders are used to determine the existence of an arrangement. | | | | | | | | | |
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| • | | Delivery has occurred. Shipping documents and customer acceptance provisions, where applicable, are used to verify delivery. | | | | | | | | | |
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| • | | The fee is fixed or determinable. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. | | | | | | | | | |
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| • | | Collectibility is reasonably assured. We assess collectibility based primarily on creditworthiness of the customer or third party device manufacturer as determined by credit assessments and payment history. | | | | | | | | | |
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Substantially all of our customer arrangements include acceptance provisions that require testing of the network against specific performance criteria. We consider the following factors in our assessment of whether the acceptance provisions are substantive: |
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| • | | whether the criteria are based on our standard performance criteria or are customer-specific; | | | | | | | | | |
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| • | | our experience with similar types of arrangements or products, as well as our experience with the specific customer; | | | | | | | | | |
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| • | | whether we would be successful in enforcing a claim for payment even in the absence of acceptance confirmation from the customer; | | | | | | | | | |
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| • | | the nature and complexity of the acceptance testing, including the planned duration of the acceptance period; and | | | | | | | | | |
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| • | | the significance of financial penalties, if any, associated with not meeting performance criteria. | | | | | | | | | |
Considering our limited historical experience to date, we have concluded for our current arrangements that the acceptance provisions are substantive. When we consider acceptance provisions to be substantive, revenue is not recognized until we have determined acceptance is achieved. Once we have achieved acceptance, we recognize revenue as follows: |
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| • | | Revenue from software that functions together with the tangible hardware elements to deliver the tangible products’ essential functionality is recognized upon delivery assuming all other revenue recognition criteria are met. Revenue from application software and related software elements which are not considered essential to the functionality of hardware devices is recognized ratably over the longest service period for post-contract customer support or PCS and professional services as we have not established VSOE for software or the related software elements. | | | | | | | | | |
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| • | | Revenue from our service offerings, including professional services such as network design and deployment support, managed services and SaaS, and ongoing customer support is recognized as services are delivered or on a proportional performance basis depending on the underlying pattern of performance. | | | | | | | | | |
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| • | | Revenue from hardware is recognized when title transfers. | | | | | | | | | |
Amounts that are invoiced prior to a transaction meeting all of the above revenue recognition criteria, including customer acceptance criteria, are recorded in deferred revenue until such criteria are satisfied. For all periods presented herein, the amount and timing of revenue and product cost recognition has been, and for the near-term will be, dependent primarily on our ability to meet substantive customer acceptance criteria. We consider a variety of factors in estimating the timing of customer acceptance, which includes contractual milestones, project schedules, availability of resources, the nature and extent of remaining testing cycles, and other relevant information provided by our project management team. Accordingly, we expect that the timing of recognition of revenue and related product costs on both a quarterly and annual basis will not be easily predictable. In addition, it is possible that the amount of current deferred revenue and related deferred cost of revenue reflected as of a balance sheet date will be significantly higher or lower than the amount of deferred revenue and related deferred cost of revenue that is ultimately recognized as revenue and cost of revenue within the 12 months following the balance sheet date. We classify deferred revenue and deferred cost of revenue that we expect to recognize during the 12 months following the balance sheet date as current deferred revenue and current deferred cost of revenue on our balance sheet and the remainder as non-current deferred revenue and non-current deferred cost of revenue. |
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Certain of our customer and third party device manufacturer contracts include contingency provisions, which impact our revenue recognition as such contingent amounts limit the amount of the total arrangement consideration under multiple deliverable contracts that can be allocated to delivered and accepted products and services. These provisions include penalties for late delivery, liquidated damages related to failure to meet milestones or deliver specified products or services, or credits to be issued upon the failure to meet service level arrangements. The amounts that could be paid under these provisions are typically limited and capped at amounts that do not exceed the maximum contract value. Accordingly, even in situations where we have received customer acceptance, we limit the revenue recognized for accepted products and services by the amount that could be paid under these provisions. We do not recognize these deferred amounts until the provisions have lapsed. |
In cases where we sell third-party products and services such as meters, hardware, services, software or software maintenance as part of the overall solution, we evaluate whether we act as principal or agent under the arrangement. The evaluation considers multiple factors, including whether we are the primary obligor under the arrangement with the utility customer, whether we bear the risk of loss and credit risk associated with the supply of third-party products and services, whether we have the ability to change the product or perform part of the service, and whether we have the ability to control the price charged to our customers for the third-party products and services. Revenue is presented on a gross basis when we conclude that we are the principal under the arrangement with respect to third-party products and services, and revenue is presented on a net basis when we conclude that we are acting as the agent. The majority of our revenue related to third-party products and services is recognized on a gross basis as we are generally acting as the principal under our arrangements. |
Shipping charges billed to customers were not significant for the years ended December 31, 2013, 2012, and 2011. Shipping charges are included in revenue, and the related shipping costs are included in cost of revenue in the accompanying consolidated statements of operations. |
Cost of Revenue | ' |
Cost of Revenue |
Cost of product revenue includes contract manufacturing costs, including raw materials, components and associated freight, and normal yield loss. In addition, cost of product revenue includes compensation, benefits and stock-based compensation provided to our manufacturing personnel, overhead and other direct costs. Product costs are deferred upon shipment and are recognized in the period in which we recognize the related revenue. Period costs, which consist primarily of logistics costs, manufacturing ramp-up costs, expenses for inventory obsolescence, standard warranty costs and lower of cost or market adjustments are recognized in the period in which they are incurred. |
Costs of providing services include personnel-related costs, depreciation and amortization, and software hosting costs. Costs of providing services are not deferred and are included in cost of revenue in the period in which they are incurred. Accordingly, there are no deferred service costs of revenue in the accompanying balance sheets. |
Deferred Revenue and Deferred Cost of Revenue | ' |
Deferred Revenue and Deferred Cost of Revenue |
Deferred revenue results from transactions where we have billed the customer for product shipped or services performed but all revenue recognition criteria have not yet been met. |
Deferred cost of revenue is recorded for products for which ownership (typically title and risk of loss) has transferred to the customer, but for which criteria for revenue recognition have not been met. We only defer tangible direct costs associated with hardware products delivered. Cost of revenue for providing services is not deferred, but is expensed in the period incurred. Deferred cost of revenue associated with deferred product revenue is recorded at the standard inventory cost at the time of shipment. We evaluate deferred cost of revenue for recoverability based on multiple factors, including whether net revenues less related direct costs will exceed the amount of deferred cost of revenue based on the terms of the overall arrangement. To the extent that deferred cost of revenue is determined to be unrecoverable, we adjust deferred cost of revenue with a charge to product cost of revenue in the current period. In connection with our recoverability assessments, we have not incurred significant impairment charges through December 31, 2013. |
We recognize deferred revenue and associated deferred cost of revenue once all revenue recognition criteria have been met. |
Product Warranty | ' |
Product Warranty |
We provide warranties for substantially all of our products. Our standard warranty period extends from one to five years. We accrue for costs of standard warranty at the time of product shipment, and record changes in estimates to warranty accruals when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. |
At the time of product shipment, we estimate and accrue for the amount of standard warranty cost and record the amount as a cost of revenue. Determining the amount of warranty costs requires management to make estimates and judgments based on historical claims experience, industry benchmarks, test data and various other assumptions including estimated field failure rates that are believed to be reasonable under the circumstances. The amount of warranty costs accrued are net of warranty obligations to be fulfilled by our suppliers. The results of these judgments formed the basis for our estimate of the total charge to cover anticipated customer warranty, repair, return and replacement and other associated costs. Should actual product failure rates, claim levels, material usage or supplier warranties on parts used in our products differ from our original estimates, revisions to the estimated warranty liability could result in adjustments to our cost of revenue in future periods. |
Certain of our standard product warranty obligations require us to reimburse a customer for installation and other related costs in the event that field reliability rates fall below contractually specified thresholds. We consider the probability that we will have to pay such incremental warranty costs based on the expected performance of a delivered product when we record new warranty obligations issued in a period as well as when we determine if any changes are required to our original estimates for pre-existing warranty obligations. |
Our warranty obligations are affected by product failure rates, claims levels, material usage and supplier warranties on parts included in our products. Because our products are relatively new and we do not have the benefit of long-term experience observing products’ performance in the field, it is possible that the estimates of a product’s lifespan and incidence of claims could vary from period to period. |
In certain customer arrangements, we have provided extended warranties for periods of up to 15 years following the initial standard warranty period. We recognize revenue associated with extended warranties over the extended warranty period when the extended warranty period commences. Costs associated with providing extended warranties are expensed as incurred during the extended warranty period. |
Supplier Concentrations and Other Inventory Risks | ' |
Supplier Concentrations and Other Inventory Risks |
We have arrangements under which substantially all of our manufacturing activity is subcontracted to third-party vendors. Currently our sole manufacturing relationship is with Plexus Corp., who provides us with a wide range of operational and manufacturing services, including material procurement, final assembly, test quality control, warranty repair, and shipment to our customers and third-party vendors. Contract manufacturing activities are conducted in the United States and are undertaken based on management’s product demand forecasts. Our contract manufacturer procures components necessary to assemble the products anticipated by management’s forecast and test the products according to our quality specifications. If the components are unused for specified periods of time, we may incur carrying charges or obsolete material charges for components that our contract manufacturers purchased to build products to meet our product demand forecasts. Our communications modules and other hardware products consist of commodity parts and certain custom components. Our components are generally available from multiple sources or suppliers. However, some components used in our products are purchased from single or limited sources. |
Finished goods are reported as inventory until title transfers to the customer. Consigned finished goods inventory that is maintained at customer locations is also reported as inventory until consumption or acceptance of the product by the customer. We account for consigned inventory on a first-in, first-out basis and record lower of cost or market or obsolete material charges when appropriate. |
Concentration of Credit and Customer Risks | ' |
Concentration of Credit and Customer Risks |
Our sales are currently concentrated with a small group of customers and third party device manufacturers principally located in the United States and Australia. In evaluating customer concentration risk, we attribute revenue to our customers, including amounts billed to third party device manufacturers for our communications modules. |
The following table summarizes the percentage of revenue related to our customers’ deployments in excess of 10% of total revenue: |
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| | Year Ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | |
PG&E | | | 39 | % | | | 30 | % | | | 34 | % |
FPL | | | 20 | | | | 31 | | | | 26 | |
OG&E | | | — | | | | 18 | | | | — | |
SMUD | | | — | | | | — | | | | 12 | |
Each of these total revenue percentages includes amounts related to the customers’ deployments that were billed directly to our third party device manufacturers, as well as direct revenue from the customers. We typically extend credit to our customers and third party device manufacturers and do not require collateral or other security in support of accounts receivable. We attempt to mitigate the credit risk in our trade receivables through our credit evaluation process and payment terms. We analyze the need to reserve for potential credit losses and record allowances for doubtful accounts when necessary. To date, we have not had any significant write-offs of uncollectible accounts receivable, and there was no allowance for doubtful accounts as of December 31, 2013 and 2012. |
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The following table summarizes the percentage of accounts receivable from customers and third party device manufacturers in excess of 10% of accounts receivable: |
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| | December 31, | | | | | |
| | 2013 | | | 2012 | | | | | |
Baltimore Gas and Electric Company | | | 26 | % | | | 26 | % | | | | |
Landis + Gyr AG (acquired by Toshiba Corporation) | | | 11 | | | | — | | | | | |
Commonwealth Edison Company | | | 10 | | | | — | | | | | |
Virginia Electric and Power Company | | | 10 | | | | — | | | | | |
Secure Meters | | | — | | | | 16 | | | | | |
Progress Energy | | | — | | | | 15 | | | | | |
General Electric Company | | | — | | | | 10 | | | | | |
Advertising Costs | ' |
Advertising Costs |
We expense advertising costs as incurred. Advertising costs were $2.2 million, $2.5 million, and $2.5 million for each of the years ended December 31, 2013, 2012, and 2011. |
Property and Equipment, Net | ' |
Property and Equipment, Net |
Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the following estimated useful lives: |
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Software | | 3 to 7 years | | | | | | | | | | |
Computer and network equipment | | 2 to 5 years | | | | | | | | | | |
Machinery and equipment | | 3 to 5 years | | | | | | | | | | |
Furniture and fixtures | | 5 to 7 years | | | | | | | | | | |
Leasehold improvements | | Lesser of the lease term or the estimated useful lives of the improvements, generally 1 to 4 years | | | | | | | | | | |
Long-Lived Assets | ' |
Long-Lived Assets |
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. For the years ended December 31, 2013, 2012, and 2011, no impairment losses were recorded. |
Research and Development | ' |
Research and Development |
Research and development costs are expensed as incurred. Under our current practice of developing new products, technological feasibility of the underlying software is not established until substantially all product development and testing is complete, which generally includes the development of a working model. Our products are released within a short period of time after achieving technological feasibility. |
Deferred Issuance Costs | ' |
Deferred Issuance Costs |
Costs directly associated with the planned issuance of equity or debt instruments are capitalized and recorded as deferred issuance costs until the issuance of such instruments. Costs directly associated with debt instruments are capitalized as deferred issuance costs and amortized over the contractual term of the debt instrument utilizing the effective interest method. Deferred issuance costs included in other long-term assets were $5.0 million as of December 31, 2012. In connection with our IPO, deferred issuance costs previously recorded in other long-term assets were recorded as an off-set to the equity proceeds. As of December 31, 2013, there were no deferred issuance costs. |
Corporate Bonus Incentive Plan | ' |
Corporate Bonus Incentive Plan |
Our corporate bonus incentive plan is funded by a combination of cash and restricted stock units, at management’s discretion. The restricted stock units granted prior to our IPO contained a performance-based condition and vested upon the effectiveness of the Registration Statement on Form S-1. As a result, we recorded the related stock-based compensation for these awards in the year ended December 31, 2013 (as discussed above—Initial Public Offering). Subsequent to our IPO, we accrue and record the related stock-based compensation for corporate bonus amounts payable under this plan in connection with the period in which it is earned. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
We measure and recognize compensation expense for all stock-based awards made to employees and directors, including stock options, restricted stock, restricted stock units, and employee stock purchase plan, based on estimated fair values. The fair values of stock options and our 2013 Employee Stock Purchase Plan (please refer to Note 9 Stock Based Compensation for further discussion) are estimated at the date of grant using the Black-Scholes-Merton option pricing model, which includes assumptions for the dividend yield, expected volatility, risk-free interest rate, and expected life. The fair values of restricted stock and restricted stock units are determined based upon the fair value of the underlying common stock at the date of grant. We expense stock-based compensation, adjusted for estimated forfeitures, using the straight-line method over the vesting term of the award. Our excess tax benefits cannot be credited to stockholders’ equity until the deduction reduces cash taxes payable; accordingly, we realized no excess tax benefits during any of the periods presented in the accompanying financial statements. The amount of capitalized stock-based employee compensation cost as of December 31, 2013 and 2012 was not material |
Preferred Stock Warrant Liability | ' |
Preferred Stock Warrant Liability |
We accounted for freestanding warrants to purchase shares of our convertible preferred stock as a liability on the consolidated balance sheets. The convertible preferred stock warrants were recorded as a liability because the underlying shares of convertible preferred stock were contingently redeemable and, therefore, could have obligated us to transfer assets at some point in the future (see Note 7 Convertible Preferred Stock and Preferred Stock Warrants). The warrants were recorded at fair value upon issuance and were subject to remeasurement to fair value at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net, on the consolidated statements of operations. In connection with our IPO, we reduced our preferred stock warrant liability by $11.2 million and recorded a loss of $0.8 million in the year ended December 31, 2013 resulting from our payment of $12.0 million as consideration for the termination of certain warrants to purchase shares of Series A preferred stock and all warrants to purchase shares of Series C preferred stock, which occurred immediately prior to the effectiveness of our IPO. We reclassified the preferred stock warrant liability for the surviving warrant to purchase shares of Series A preferred stock and all warrants to purchase shares of Series E preferred stock to additional paid-in capital, as these warrants converted to warrants to purchase shares of common stock. As of December 31, 2013, there were no longer any preferred stock warrants outstanding. |
Income Taxes | ' |
Income Taxes |
Income taxes are calculated using the asset and liability method. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the tax bases of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. We record a valuation allowance to reduce our deferred tax assets to the amount of future tax benefit that we believe is more likely than not to be realized. |
We follow a two-step approach to recognizing and measuring tax benefits associated with uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if, based on the technical merits, it is more likely than not that the tax position will be sustained upon examination by a taxing authority, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement with a taxing authority. We recognize any interest and penalties related to uncertain tax positions in the provision for income taxes line of our consolidated statements of operations. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740)-Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The standard requires us to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward or other tax credit carryforward when settlement in this manner is available under applicable tax law. We early adopted this guidance during the year ended December 31, 2013. The adoption of this guidance did not have a material impact on our consolidated financial statements. |
In February 2013, the FASB issued Accounting Standards Update No. 2013-02, Comprehensive Income (Topic 220)-Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The standard requires entities to present (either on the face of the income statement or in the notes) the effects on the line items of the income statement for amounts reclassified out of accumulated other comprehensive income. We adopted this guidance on January 1, 2013, and the adoption did not have an impact on our consolidated financial statements. |
Net Loss Per Share | ' |
Basic net loss per share applicable to common stockholders is computed by dividing the net loss applicable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share applicable to common stockholders is computed by giving effect to all potential shares of common stock, including convertible debt, stock options, warrants and convertible preferred stock, to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential common shares outstanding would have been anti-dilutive. |
Fair Value Measurements | ' |
We measure certain financial assets and liabilities at fair value on a recurring basis. |
The measurements of fair value were established based on a fair value hierarchy that prioritizes the inputs. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories: |
Level 1—Quoted (unadjusted) prices in active markets for identical assets or liabilities. |
Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. |
Level 3—Unobservable inputs in which there is little or no market data, which requires us to develop our own assumptions. Our Level 3 liabilities consist of warrants to purchase convertible preferred stock and embedded derivatives related to our convertible promissory notes. |
Level 1 measurements are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 measurements are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. We did not have any transfers of financial instruments between valuation levels during the year ended December 31, 2013. |
Operating and Capital Leases | ' |
Our primary operating lease commitment at December 31, 2013, related to our headquarters in Redwood City, California, requires monthly lease payments through December 2016. We recognize rent expense on a straight-line basis over the lease period. Where leases contain escalation clauses, rent abatements, or concessions, such as rent holidays and landlord or tenant incentives or allowances, we apply them in the determination of straight-line rent expense over the lease term. |
Valuation of Employee Stock-Based Compensation | ' |
We recognize compensation expense for stock-based awards based on their grant-date fair value on a straight-line basis over the service period for which such awards are expected to be outstanding. The fair value of stock options granted pursuant to our equity incentive plans is determined using the Black-Scholes-Merton option pricing model. The determination of fair value is affected by the estimates of our valuation, as well as assumptions regarding subjective and complex variables such as expected employee exercise and forfeiture behavior and our expected stock-price volatility over the expected term of the award. Generally, assumptions are based on historical information and judgment was required to determine if historical trends may be indicators of future outcomes. The fair value of each option grant is estimated on the date of grant. |
Prior to our IPO, our Board of Directors considered a broad range of factors to determine the fair value of our common stock at each meeting at which awards were approved. These factors included, but were not limited to, the prices for our convertible preferred stock sold to outside investors in arm’s-length transactions, the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock, our operating and financial performance, the hiring of key personnel, the introduction of new products, our stage of development and revenue growth, the lack of an active public market for our common and preferred stock, industry information such as market growth and volume, the performance of similarly-situated companies in our industry, the execution of strategic and development agreements, the risks inherent in the development and expansion of our products and services, the prices of our common stock sold to outside investors in arm’s-length transactions, and the likelihood of achieving a liquidity event, such as an initial public offering or sale given prevailing market conditions and the nature and history of our business. |
We currently have no history or expectation of paying cash dividends on our common stock. We estimate the volatility of our common stock at the date of grant based on the historical and implied volatility of the stock prices of a peer group of publicly-traded companies for a period equal to the expected life of our stock options. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of the awards in effect at the time of grant. The expected term represents the weighted-average period the stock options are expected to remain outstanding. The expected term is determined based on historical exercise behavior, post-vesting termination patterns, options outstanding and future expected exercise behavior. |
Segment Information | ' |
We operate in one reportable segment. Our chief operating decision maker is our Chief Executive Officer, who reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire company. Revenue by geography is based on the billing address of the utility customer. |