Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the consolidated financial statements. The Company believes that a significant accounting policy is one that is both important to the portrayal of the Company’s financial condition and results, and requires management’s most difficult, subjective, or complex judgments, often as the result of the need to make estimates about the effect of matters that are inherently uncertain. Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). The Company adopted ASC 842 using the additional transition method introduced by ASU 2018-11 Use of Estimates and Uncertainties 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, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts expensed during the reporting period. Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition and revenue reserves, contingent liabilities, intangible asset valuations, and the realizability of the Company’s deferred tax assets. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. The Company is subject to a number of risks and uncertainties common to companies in similar industries and stages of development including, but not limited to, rapid technological changes, competition from substitute products and services from larger companies, customer concentration, management of international activities, protection of proprietary rights, patent litigation, and dependence on key individuals. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Subsequent Events Considerations The Company considers 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. Subsequent events have been evaluated as required. The Company has evaluated all subsequent events and determined that, other than as reported herein and described below, there are no material recognized or unrecognized subsequent events. Foreign Currency Translation The reporting currency of the Company is the U.S. dollar. The functional currency of the Company’s foreign subsidiaries is the local currency of each subsidiary. All assets and liabilities in the balance sheets of entities whose functional currency is a currency other than the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows: (1) asset and liability accounts at period-end Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Management determines the appropriate classification of investments at the time of purchase, and re-evaluates Cash and cash equivalents primarily consist of cash on deposit with banks and amounts held in interest-bearing money market accounts. Cash equivalents are carried at cost, which approximates their fair market value. Cash and cash equivalents as of December 31, 2019 and 2018 consist of the following: December 31, 2019 Description Contracted Maturity Amortized Cost Fair Market Value Balance Per Balance Cash Demand $ 22,718 $ 22,718 $ 22,718 Money market funds Demand 41 41 41 Total cash and cash equivalents $ 22,759 $ 22,759 $ 22,759 December 31, 2018 Description Contracted Maturity Amortized Cost Fair Market Value Balance Per Balance Cash Demand $ 21,007 $ 21,007 $ 21,007 Money market funds Demand 8,299 8,299 8,299 Total cash and cash equivalents $ 29,306 $ 29,306 $ 29,306 Disclosure of Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash, cash equivalents, accounts receivable, accounts payable, accrued expenses, capital lease liabilities and equipment financing, approximated their fair values at December 31, 2019 and 2018, due to the short-term nature of these instruments. The Company has evaluated the estimated fair value of financial instruments using available market information and management’s estimates. The use of different market assumptions and/or estimation methodologies could have a significant impact on the estimated fair value amounts. See Note 6 for further discussion. Revenue The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers Cost of Revenue Cost of revenue primarily consists of costs related to supporting and hosting the Company’s product offerings and delivering professional services. These costs include salaries, benefits, incentive compensation and stock-based compensation expense related to the management of the Company’s data centers, customer support team and the Company’s professional services staff, in addition to third-party service provider costs such as data center and networking expenses, allocated overhead, amortization of capitalized internal-use Allowance for Doubtful Accounts The Company offsets gross trade accounts receivable with an allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable and is based upon historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Provisions for allowances for doubtful accounts are recorded in general and administrative expense. Below is a summary of the changes in the Company’s allowance for doubtful accounts for the years ended December 31, 2019, 2018 and 2017: Balance at Provision Write-offs Balance at Year ended December 31, 2019 $ 190 $ 1,137 $ (423 ) $ 904 Year ended December 31, 2018 146 199 (155 ) 190 Year ended December 31, 2017 154 203 (211 ) 146 Off-Balance The Company has no significant off-balance For the years ended December 31, 2019, 2018 and 2017, no individual customer accounted for more than 10% of total revenue. As of December 31, 2019 and 2018, no individual customer accounted for more than 10% of accounts receivable, net. Concentration of Other Risks The Company is dependent on certain content delivery network providers who provide digital media delivery functionality enabling the Company’s on-demand end-users. Software Development Costs Costs incurred to develop software applications used in the Company’s on-demand internal-use internal-use internal-use During the years ended December 31, 2019, 2018 and 2017, the Company capitalized $6,574, $3,152 and $3,239, respectively, of internal-use internal-use Property and Equipment Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset. Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation, are removed from the accounts, and any resulting gain or loss is included in the determination of net income or loss in the period of retirement. Property and equipment consists of the following: Estimated Useful Life (in Years) December 31, 2019 2018 Computer equipment 3 $ 14,807 $ 14,076 Software 3 - 6 27,882 21,208 Furniture and fixtures 5 2,965 2,929 Leasehold improvements Shorter of lease 1,821 1,665 47,475 39,878 Less accumulated depreciation and amortization 35,389 30,175 $ 12,086 $ 9,703 Depreciation and amortization expense, which includes amortization expense associated with capitalized internal-use Expenditures for maintenance and repairs are charged to expense as incurred, whereas major improvements are capitalized as additions to property and equipment. Right-of-Use The Company accounts for its right-of-use Leases 2018-11. right-of-use Long-Lived Assets The Company reviews long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During this review, the Company re-evaluates For the years ended December 31, 2019, 2018 and 2017, the Company has not identified any impairment of its long-lived assets. Business Combinations The Company records tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting. Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. The Company then allocates the purchase price in excess of net tangible assets acquired to identifiable intangible assets based on detailed valuations that use information and assumptions provided by management. Any excess purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed is allocated to goodwill. If the fair value of the assets acquired exceeds the purchase price, the excess is recognized as a gain. Significant management judgments and assumptions are required in determining the fair value of acquired assets and liabilities, particularly acquired intangible assets. The valuation of purchased intangible assets is based upon estimates of the future performance and cash flows from the acquired business. Each asset is measured at fair value from the perspective of a market participant. If different assumptions are used, it could materially impact the purchase price allocation and adversely affect our results of operations, financial condition and cash flows. For further discussion of the Company’s accounting policies related to business combinations, see Note 3. Intangible Assets and Goodwill Intangible assets that have finite lives are amortized over their estimated useful lives based on the pattern of consumption of the economic benefit or, if that pattern cannot be readily determined, on a straight-line basis and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, as discussed above. Goodwill is not amortized, but is evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Conditions that could trigger a more frequent impairment assessment include, but are not limited to, a significant adverse change in certain agreements, significant underperformance relative to historical or projected future operating results, an economic downturn in customers’ industries, increased competition, a significant reduction in our stock price for a sustained period or a reduction of our market capitalization relative to net book value. The Company has determined, based on its organizational structure, that it had one reporting unit as of December 31, 2019 and 2018. The Company evaluates impairment by comparing the estimated fair value of its reporting unit to its carrying value. The Company estimates fair value primarily utilizing the market approach. The Company adopted ASU 2017-04 Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, other events, and circumstances from non-owner Net Loss per Share The Company calculates basic and diluted net loss per common share by dividing the net loss by the number of common shares outstanding during the period. The Company has excluded other potentially dilutive shares, which include warrants to purchase common stock and outstanding common stock options and unvested restricted stock units, from the number of common shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses incurred. The following outstanding common shares have been excluded from the computation of dilutive net loss per share as of December 31, 2019, 2018 and 2017: Year Ended December 31, 2019 2018 2017 Options outstanding 2,479 2,738 4,127 Restricted stock units outstanding 3,626 3,034 2,050 Income Taxes The Company accounts for income taxes in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. In addition, this method requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not Stock-Based Compensation At December 31, 2019, the Company had five stock-based compensation plans, which are more fully described in Note 8. The Company values its shares of common stock in connection with the issuance of stock-based equity awards using the closing price of the Company’s shares of common stock on the NASDAQ Global Market on the date of the grant. Accounting guidance requires employee stock-based payments to be accounted for under the fair value method. Under this method, the Company is required to record compensation cost based on the estimated fair value for stock-based awards granted over the requisite service periods for the individual awards, which generally equals the vesting periods. The Company uses the straight-line amortization method for recognizing stock-based compensation expense associated with equity awards to employees. For stock options issued under the Company’s stock-based compensation plans, the fair value of each option grant is estimated on the date of grant. For service-based options, the Company recognizes compensation expense on a straight-line basis over the requisite service period of the award. The fair value of each option grant issued under the Company’s stock-based compensation plans was estimated using the Black-Scholes option-pricing model. The expected volatility of options granted has been determined using a weighted-average of the historical volatility measures of a peer group of companies that issued options with substantially similar terms as well as the historical volatility of the Company’s own common stock. The expected life of options has been determined utilizing the “simplified method”. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. The weighted-average fair value of options granted during the years ended December 31, 2019, 2018 and 2017, was $4.49, $4.11 and $3.08 per share, respectively. The weighted-average assumptions utilized to determine such values are presented in the following table: Year Ended December 31, 2019 2018 2017 Risk-free interest rate 2.25 % 2.88 % 2.08 % Expected volatility 44 % 43 % 42 % Expected life (in years) 6.2 6.2 6.1 Expected dividend yield — — — For restricted stock units issued under the Company’s stock-based compensation plans, the fair value of each grant is calculated based on the Company’s stock price on the date of grant. For performance-based awards with service-based vesting conditions, the Company recognizes compensation expense based upon a review of the Company’s expected achievement against the specified targets. The Company recognized $2.9 million of stock-based compensation expense relating to performance-based awards for the year ended December 31, 2019. As of December 31, 2019, there was $22,423 of total unrecognized stock-based compensation expense related to stock-based awards that is expected to be recognized over a weighted-average period of 2.15 years. The following table summarizes stock-based compensation expense as included in the consolidated statement of operations for the years ended December 31, 2019, 2018 and 2017: Year Ended December 31, 2019 2018 2017 Cost of subscription and support revenue $ 683 $ 481 $ 439 Cost of professional services and other revenue 289 242 251 Research and development 1,444 1,281 1,563 Sales and marketing 2,713 2,377 2,750 General and administrative 4,130 2,268 2,240 $ 9,259 $ 6,649 $ 7,243 Upon the adoption of ASU 2016-09 ASU 2016-09, See Note 8 for a summary of the stock option and restricted stock activity under the Company’s stock-based compensation plans for the year ended December 31, 2019. Advertising Costs Advertising costs are charged to operations as incurred. The Company incurred advertising costs of $2,658, $2,657and $2,485 for the years ended December 31, 2019, 2018 and 2017, respectively. Merger-related Costs Merger-related costs consist of expenses related to mergers and acquisitions, integration costs and general corporate development activities. In 2019, merger-related costs incurred were primarily in connection with the entry into a definitive agreement in February 2019 to acquire the online video player related assets from Ooyala, Inc. and certain of its subsidiaries and costs related to the transition of Ooyala customers to the Company’s technology. The Company incurred merger-related costs of $11,447, $716 and $0 for the years ended December 31, 2019, 2018 and 2017, respectively. Recent Accounting Pronouncements and Standards Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, |