| Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2019 |
| Accounting Policies [Abstract] | |
| 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 and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and judgments relied upon by management in preparing these consolidated financial statements include revenue recognition, provision for doubtful accounts, reserves for excess and obsolete inventory, valuation of inventory and deferred inventory costs, the expensing and capitalization of software-related research and development costs, amortization and depreciation periods, recoverability of net deferred tax assets, valuations of uncertain tax positions, provision for (benefit from) income taxes, warranty allowances, the valuation of the Company’s common stock and other equity instruments, and stock-based compensation expense. Although the Company regularly reassesses the assumptions underlying 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 existing at the time such estimates are made. |
| Cash and Cash Equivalents, Restricted Cash | Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include all highly liquid investments maturing within three months from the date of purchase. As of December 31, 2019 and 2018, the Company’s cash and cash equivalents consisted of investments in certificates of deposit and money market mutual funds. Restricted cash, which was included in other assets as of December 31, 2019 and 2018, consisted of a certificate of deposit of $1,019 in each period pledged as collateral for a stand-by letter of credit required to support a contractual obligation. The following table is a reconciliation of cash, cash equivalents and restricted cash included in the accompanying consolidated balance sheets that sum to the total cash, cash equivalents and restricted cash included in the accompanying consolidated statements of cash flows.
December 31, 2019
December 31, 2018
Cash and cash equivalents
$
113,638
$
280,587
Restricted cash included in other assets
1,019
1,019
$
114,657
$
281,606 |
| Accounts Receivable | Accounts Receivable Accounts receivable are presented net of a provision for doubtful accounts, which is an estimate of amounts that may not be collectible. Accounts receivable for arrangements with customary payment terms, which are one year or less, are recorded at invoiced amounts and do not bear interest. The Company generally does not require collateral, but the Company may, in certain instances based on its credit assessment, require full or partial prepayment prior to shipment. In limited instances, for certain customers and/or for certain transactions, the Company provides extended payment arrangements to allow the customer to pay for the purchased equipment in monthly, other periodic or lump-sum payments over a period of one to five years. In certain circumstances, the receivables may be collateralized by the underlying assets over the payment period. Payments due beyond 12 months from the balance sheet date are recorded as non-current assets. Accounts receivable as of December 31, 2019 and 2018 consisted of the following:
December 31,
2019
2018
Current portion of accounts receivable, net:
Accounts receivable, net
$
91,273
$
79,526
Accounts receivable, extended payment arrangements
1,827
2,256
93,100
81,782
Accounts receivable, net of current portion:
Accounts receivable, extended payment arrangements
575
2,388
$
93,675
$
84,170
The Company performs ongoing credit evaluations of its customers and, if necessary, provides a provision for doubtful accounts and expected losses. When assessing and recording its provision for doubtful accounts, the Company evaluates the age of its accounts receivable, current economic trends, creditworthiness of the customers, customer payment history, and other specific customer and transaction information. The Company writes off accounts receivable against the provision when it determines a balance is uncollectible and no longer actively pursues collection of the receivable. Adjustments to the provision for doubtful accounts are recorded as selling, general and administrative expenses in the consolidated statements of operations and comprehensive (loss) income. A summary of changes in the provision for doubtful accounts for the years ended December 31, 2019, 2018 and 2017 is as follows:
Year Ended December 31,
2019
2018
2017
Provision for doubtful accounts at beginning of year
$
410
$
692
$
690
Provisions and recoveries
560
—
6
Write-offs
(950
)
(282
)
(4
)
Provision for doubtful accounts at end of year
$
20
$
410
$
692
As of December 31, 2019 and 2018, the Company concluded that all amounts due under extended payment term arrangements were collectible and no reserve for credit losses was recorded. During the years ended December 31, 2019, 2018 and 2017, the Company did not provide a reserve for credit losses and did not write off any uncollectible receivables due under extended payment term arrangements. |
| Inventories | Inventories Inventories are valued at the lower of cost or market value. Cost is computed using the first-in first-out convention. Inventories are composed of hardware and related component parts of finished goods. The Company establishes provisions for excess and obsolete inventories after evaluating historical sales, future demand, market conditions, expected product life cycles, and current inventory levels to reduce such inventories to their estimated net realizable value. Such provisions are made in the normal course of business and charged to cost of revenue in the consolidated statements of operations and comprehensive (loss) income. Deferred inventory costs are included within inventory in the consolidated balance sheets. Deferred inventory costs represent the cost of products that have been delivered to the customer for which revenue associated with the arrangement has been deferred as a result of not meeting all of the required revenue recognition criteria, such as receipt of customer acceptance. Until the revenue recognition criteria are met, the Company retains the right to a return of the underlying inventory. Deferred inventory costs are recognized as cost of revenue in the consolidated statements of operations and comprehensive (loss) income when the related revenue is recognized. |
| Property and Equipment | Property and Equipment Property and equipment is stated at historical cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are recorded at cost with any reimbursement from the landlord being accounted for as deferred rent, which is amortized using the straight-line method over the lease term. Costs for trial systems held and used by the Company’s customers pursuant to evaluation agreements are also included within property and equipment. Trial systems held and used by the Company’s customers are depreciated over the estimated useful life of such assets, which is two years. Whenever a trial system is sold to a customer and the selling price is recorded as revenue, the related net book value of the trial system sold is removed from property and equipment and recorded as a cost of revenue. Maintenance and repairs expenditures are charged to expense as incurred. Estimated useful lives of the respective property and equipment assets are as follows:
Estimated Useful Life
Computers and purchased software
3 years
Leasehold improvements
Shorter of lease term or 7 years
Furniture and fixtures
7 years
Machinery and equipment
3 – 5 years
Building
40 years
Building improvements
5 – 40 years
Trial systems at customers’ sites
2 years 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 (loss) income from operations. |
| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company evaluates its long-lived assets, which consist primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset, less the cost to sell. No events or changes in circumstances existed to require an impairment assessment during the years ended December 31, 2019, 2018 and 2017. |
| Deferred Offering Costs | Deferred Offering Costs Deferred offering costs of $4,094, consisting of legal, professional accounting and other third-party fees related to the IPO, were reclassified to additional paid-in capital as a reduction of the proceeds upon the closing of the IPO in December 2017. Deferred offering costs of $1,148 and $2,384 were paid during the years ended December 31, 2018 and 2017, respectively. No deferred offering costs were paid during the year ended December 31, 2019. |
| Concentration of Risks | Concentration of Risks Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. Cash and cash equivalents consist of demand deposits, savings accounts, commercial paper, money market mutual funds, and certificates of deposit with financial institutions, which may exceed Federal Deposit Insurance Corporation limits. The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Significant customers are those that represent 10% or more of revenue or accounts receivable and are set forth in the following tables:
Revenue
Accounts Receivable, Net
Year Ended December 31,
December 31,
2019
2018
2017
2019
2018
Customer A
14
%
27
%
37
%
11
%
13
%
Customer B
*
11
%
11
%
*
15
%
Customer C
*
12
%
*
14
%
18
%
Customer D
*
14
%
*
*
28
%
Customer E
*
*
*
19
%
*
Customer F
12
%
*
*
*
*
*
Less than 10% of total Customer B was a related party until October 19, 2018, Liberty Global Affiliates (see Note 16). Certain of the components and subassemblies included in the Company’s products are obtained from a single source or a limited group of suppliers. Although the Company seeks to reduce dependence on those limited sources of suppliers and manufacturers, the partial or complete loss of certain of these sources could have a material adverse effect on the Company’s operating results, financial condition and cash flows and damage its customer relationships. |
| Goodwill and Acquired Intangible Assets | Goodwill and Acquired Intangible Assets Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. The Company tests goodwill for impairment on an annual basis and between annual tests when impairment indicators are identified, and goodwill is written down when impaired. Goodwill has been recognized in connection with the acquisition of NetComm on July 1, 2019 (refer to Note 3). The Company performs its annual goodwill impairment test during its fourth quarter. For its annual goodwill impairment test, the Company operates under one reporting unit and the fair value of its reporting unit has been determined based on the Company’s enterprise value. As part of the annual goodwill impairment test, the Company has the option to perform a qualitative assessment to determine whether further impairment testing is necessary. Examples of events and circumstances that might indicate that the reporting unit’s fair value is less than its carrying amount include macro-economic conditions such as deterioration in the entity’s operating environment or industry or market considerations; entity-specific events such as increasing costs, declining financial performance, or loss of key personnel; or other events such as a sustained decrease in the stock price on either an absolute basis or relative to peers. If, as a result of its qualitative assessment, it is more likely than not (i.e., greater than 50% chance) that the fair value of the Company’s reporting unit is less than its carrying amount, the quantitative impairment test will be required. Otherwise, no further testing will be required. The Company completed its qualitative assessment and concluded that as of December 31, 2019, it is not more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount. The Company's intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives, ranging from three to ten years. The Company evaluates the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. The Company considered potential impairment indicators of acquired intangible assets at December 31, 2019 and noted no indicators of impairment. |
| Product Warranties | Product Warranties Substantially all of the Company’s products are covered by a warranty for software and hardware for periods ranging from 90 days to one year. In addition, in conjunction with customers’ renewals of maintenance and support contracts, the Company offers an extended warranty for periods typically of one to three years for agreed-upon fees. In the event of a failure of a hardware product or software covered by these warranties, the Company must repair or replace the software or hardware or, if those remedies are insufficient, and at the discretion of the Company, provide a refund. The Company’s warranty reserve, which is included in accrued expenses and other current liabilities in the consolidated balance sheets, reflects estimated material, labor and other costs related to potential or actual software and hardware warranty claims for which the Company expects to incur an obligation. The Company’s estimates of anticipated rates of warranty claims and the costs associated therewith are primarily based on historical information and future forecasts. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary. If the historical data used to calculate the adequacy of the warranty reserve are not indicative of future requirements, additional or reduced warranty reserves may be required. A summary of changes in the amount reserved for warranty costs for the years ended December 31, 2019, 2018 and 2017 is as follows:
Year Ended December 31,
2019
2018
2017
Warranty reserve at beginning of year
$
926
$
1,246
$
1,256
Provisions
3,603
1,886
1,829
Acquired warranty reserve
1,867
—
—
Charges
(3,948
)
(2,206
)
(1,839
)
Warranty reserve at end of year
$
2,448
$
926
$
1,246
The increase in the warranty charges and reserve for the year ended December 31, 2019 is primarily due to warranty obligations obtained with the acquisition of NetComm on July 1, 2019. |
| Revenue Recognition | Revenue Recognition Effective January 1, 2019, the Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective transition method. This method was applied to contracts that were not complete as of the date of initial application. The following is a summary of new and/or revised significant accounting policies affected by the Company’s adoption of ASC 606, which relate primarily to revenue and cost recognition. Refer to Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for the policies in effect for revenue and cost recognition prior to January 1, 2019. The Company generates revenue from sales of its products, along with associated maintenance, support and extended hardware warranty services, and, to a lesser extent, from sales of professional services. The Company also generates revenue from sales of additional line cards and software-based capacity expansions. Maintenance and support services include telephone support, bug fixes and unspecified software upgrades and updates provided on a when-and-if-available basis and/or extended hardware warranty. In the Company’s consolidated statements of operations and comprehensive (loss) income, revenue from sales of broadband products, Axyom products and fixed wireless access and fiber-to-the-distribution-point (FTTdp) devices are classified as product revenue, and revenue from maintenance and support and professional services is classified as service revenue. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised products or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these products or services. To achieve the core principle of this standard, the Company applies the following five steps: 1) Identify the contract with a customer 2) Identify the performance obligations in the contract 3) Determine the transaction price 4) Allocate the transaction price to performance obligations in the contract 5) Recognize revenue when or as the Company satisfies a performance obligation Performance Obligations The majority of the Company’s contracts with customers contain multiple performance obligations including products and maintenance services, and on a limited basis, professional services. For these contracts, the Company accounts for individual performance obligations separately if they are considered distinct. The Company’s broadband products, Axyom products, maintenance services and professional services are considered distinct performance obligations. When multiple performance obligations exist in a customer contract, the transaction price is allocated to the separate performance obligations on a relative SSP basis. Determination of SSP requires judgment and is based on the best evidence available which may include the standalone selling price of products when sold on a standalone basis to similar customers in similar circumstances, or in the absence of standalone sales, taking into consideration the Company’s historical pricing practices by customer type, selling method (i.e. resellers or direct), and geographic-specific market factors. Product revenue The Company’s broadband products have both software and non-software (i.e., hardware) components that function together to deliver the products’ essential functionality. Broadband hardware products generally cannot be used apart from the embedded software and is considered one distinct performance obligation. Revenue on broadband hardware products with embedded software is recognized at a point in time when control of the products is transferred to the customer, which is typically when risk of loss has transferred and the right to payment is enforceable. This is generally when the product has shipped or been delivered, based on agreed-upon shipping terms. The Company also earns revenue from the sale of software-enabled capacity expansions. Revenue on software-enabled capacity expansions are distinct performance obligations as they are separately identifiable and provide additional bandwidth capacity on hardware products already purchased by the customer. Revenue is recognized on software-enabled capacity expansions when control is transferred, which is typically when risk of loss has transferred and the right to payment is enforceable. This is generally when the software-based capacity expansions are made available to the customer. The Company also generates revenue from the sale of its Axyom software platform and related delivery platform hardware including indoor and outdoor Apex small cells. Perpetual licenses and hardware are distinct performance obligations as they are separately identifiable, and the customer can benefit from the licenses and hardware on its own. Revenue is recognized at a point in time when control of the products is transferred to the customer, which is typically when risk of loss has transferred and the right to payment is enforceable. Generally, this occurs when software licenses are made available to customers and hardware products are shipped or delivered, based on agreed-upon shipping terms. The Company also generates revenue from the sale of its fixed wireless access and fiber-to-the-distribution-point (“FTTdp”) devices, the product line acquired via the acquisition of NetComm on July 1, 2019. The arrangements consist of a single hardware element making it a distinct performance obligation as they are separately identifiable, and the customer can benefit from the hardware on their own. Revenue is generally recognized at a point in time when control of the asset is transferred to the customer. Generally, this occurs when hardware products are shipped or delivered, based on agreed-upon shipping terms. When customer contracts require acceptance of product and services, the Company considers the nature of the acceptance provisions to determine if they are substantive or considered a formality that does not impact the timing of revenue recognition. When acceptance provisions are considered substantive, the Company will defer revenue on all performance obligations in the contract subject to acceptance until acceptance has been received. The Company does not defer revenue when acceptance provisions are deemed a formality. Maintenance and Support Services and Professional Services Revenue The Company’s broadband and Axyom products are sold with maintenance and support services, a distinct performance obligation, that includes the stand-ready obligation to provide telephone support, bug fixes and unspecified software upgrades and updates provided on a when-and-if-available basis and/or extended hardware warranty. The Company’s fixed wireless access and fiber-to-the-distribution-point (FTTdp) devices generally do not have a support component. After the initial sale, customers may purchase annual renewals of support contracts. The Company’s telephone support and unspecified upgrades and updates are delivered over time and therefore revenue is recognized ratably over the contract term, which is typically one year, but can be as long as five years. The Company also generates revenue from sales of professional services, such as installation, configuration and training. Professional services are a distinct performance obligation since the Company’s products are functional without these services and can generally be performed by the customer or a third party. Professional services are generally delivered over time, with revenue recognized as services are performed, which is generally based on labor hours incurred during the period compared to the total estimated labor hours. The sale of the Company’s products generally includes a 90-day warranty on the software and a one-year warranty on the hardware component of the products, which includes repair or replacement of the applicable hardware. These warranties are to ensure the products perform in accordance with the Company’s specifications and are therefore not a performance obligation. The Company records a warranty accrual for the initial software and hardware warranty included with product sales and does not defer revenue. Resellers and Sales Agents The Company markets and sell its products through its direct global sales force, supported by sales agents, and through resellers. The Company’s resellers receive an order from an end customer prior to placing an order with the Company, and the Company confirms the identification of or is aware of the end customer prior to accepting such order. The Company invoices the reseller an amount that reflects a reseller discount and records revenue based on the amount of the discounted transaction value. The Company’s resellers do not stock inventory received from the Company. When the Company transacts with a reseller, the contract is with the reseller and not with the end customer. Whether the Company transacts business with and receives the order from a reseller or directly from an end customer, its revenue recognition policy and resulting pattern of revenue recognition for the order are the same. The Company also uses sales agents that assist in the sales process with certain customers primarily located in the Latin America and Asia-Pacific regions. Sales agents are not resellers. If a sales agent is engaged in the sales process, the Company receives the order directly from and sells the products and services directly to the end customer, and the Company pays a commission to the sales agent, calculated as a percentage of the related transaction value. Accounting considerations related to sales agent commissions are discussed in the “Costs to Obtain or Fulfill a Contract” section below. The Company has assessed whether it is the principal (i.e., reports revenues on a gross basis) or agent (i.e., reports revenues on a net basis) by evaluating whether it has control of the good or service before it is transferred to the customer. Generally, the Company controls the promised good or service before transferring it to the customer and acts as the principal in the transaction. Accordingly, the Company reports revenues on a gross basis. Costs to Obtain or Fulfill a Contract The Company capitalizes commission expenses paid to internal sales personnel and sales agent commissions that are incremental to obtaining customer contracts, for which the related revenue is recognized over a future period. These costs are incurred on initial sales of product, maintenance and professional services and maintenance and support contract renewals. The Company defers these costs and amortizes them over the period of benefit, which the Company generally considers to be the contract term or length of the longest delivery period as contract capitalization costs in the consolidated balance sheets. Commissions paid relating to contract renewals are deferred and amortized on a straight-line basis over the related renewal period as commissions paid on renewals are commensurate with commissions paid on initial sales transactions. The Company periodically reviews the carrying amount of capitalized contract costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. The Company also pays commissions on maintenance and support contract renewals. Commissions paid on renewals are commensurate with commissions paid on the initial maintenance and support contracts. These commissions are deferred and amortized on a straight-line basis over the related renewal period. Costs to obtain a contract for professional services contracts are expensed as incurred in accordance with the practical expedient as the contractual period of the Company’s professional services contracts are one year or less. As of January 1, 2019 and December 31, 2019, the Company had short-term capitalized contract costs of $209 and $585, respectively, which are included in prepaid expenses and other current assets and had long-term capitalized contract costs of $128 and $70, respectively, which are included in other assets in the accompanying consolidated balance sheets. During the year ended December 31, 2019, amortization expense associated with capitalized contract costs was $695 which was recorded to selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive (loss) income. Deferred Revenue Amounts billed in excess of revenue recognized are recorded as deferred revenue. Deferred revenue includes customer deposits, amounts billed for maintenance and support services contracts in advance of services being performed, amounts for trade-in right liabilities and amounts related to contracts that have been deferred as a result of not meeting the required revenue recognition criteria as of the end of the reporting period. Deferred revenue expected to be recognized as revenue more than one year subsequent to the balance sheet date is reported within long-term liabilities in the consolidated balance sheets. The Company defers recognition of direct costs, such as cost of goods and services, until recognition of the related revenue. Such costs are classified as current assets if the related deferred revenue is classified as current, and such costs are classified as non-current assets if the related deferred revenue is classified as non-current. Other Revenue Recognition Policies The Company’s customary payment terms are generally one year or less. The Company has elected to apply the practical expedient that allows an entity to not adjust the promised amount of consideration in customer contracts for the effect of a significant financing component when the period between the transfer of product and services and payment of the related consideration is less than one year. If the Company provides extended payment terms that represent a significant financing component, the Company adjusts the amount of promised consideration for the time value of money using its discounted rate and recognizes interest income separate from the revenue recognized on contracts with customers. During the year ended December 31, 2019, the Company recorded $160 in interest income in its consolidated statements of operations and comprehensive (loss) income. In limited instances, the Company has offered future rebates to customers based on a fixed or variable percentage of actual sales volumes over specified periods. The future rebates earned based on the customer’s purchasing from the Company in one period may be used as credits to be applied by them against accounts receivable due to the Company in later periods. The Company accounts for these future rebates as variable consideration and reduces the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the variable consideration is resolved. The reduction of the transaction price is estimated based on historical activity and other relevant factors and is recognized when the Company recognizes revenue for the transfer of goods and services to the customer on which the future rebate was earned. Other forms of contingent revenue or variable consideration are infrequent. When a customer contract includes future trade-in rights, which are distinct performance obligations, the Company accounts for the customer contract by recognizing the revenue on the products transferred, deferring revenue allocated to the future product based on a relative standalone selling price, and an asset for the value of the trade-in product to be recovered from the customer upon delivery of the future product. The Company assesses and updates these estimates each reporting period, and updates to these estimates may result in either an increase or decrease in the amount of the future product liability and product return asset. The Company recognizes revenue allocated to the future product when the product has shipped or been delivered, and control has transferred. As of December 31, 2019, there were no future product liabilities or product return assets. The Company excludes any taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction (e.g., sales, use and value added taxes) from its transaction price. Billings to customers for reimbursement of out-of-pocket expenses, including travel, lodging and meals, are recorded as revenue, and the associated costs incurred by the Company for those items are recorded as cost of revenue. Revenue related to the reimbursement of out-of-pocket costs are accounted for as variable consideration. The Company accounts for any shipping and handling activities as a fulfilment cost rather than an additional promised service. Shipping and handling billed to customers is recorded as an offset to cost of revenue. Contract Balances Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue when the Company satisfies its performance obligations, consistent with the above methodology. For the year ended December 31, 2019, the Company recognized $22,273 of revenue that was included in deferred revenue as of January 1, 2019. The Company receives payments from customers based upon contractual billing terms. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced. As of January 1, 2019 and December 31, 2019, contract assets of $28 and $50, respectively, were included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. Transaction Price Allocated to the Remaining Performance Obligations As of December 31, 2019, the aggregate remaining amount of revenue expected to be recognized related to unsatisfied or partially unsatisfied performance obligations is $30,068. The Company expects approximately 85% of this amount to be recognized in the next twelve months with the remainder to be recognized over the next two to five years. Disaggregation of Revenue The Company disaggregates its revenue by product and service in the consolidated statements of operations and comprehensive (loss) income. Performance obligations related to product revenue are recognized at a point in time, while performance obligations related to service revenue are recognized over time. The Company also disaggregates its revenue based on geographic locations of its customers, as determined by the customer’s shipping address. Transition Disclosures In accordance with the modified retrospective method transition requirements, the Company has presented the financial statement line items impacted and adjusted to compare to presentation under ASC Topic 605, Revenue Recognition
As of December 31, 2019
Balance Sheet
As Reported under ASC 606
Adjustments
Without adoption of ASC 606
Assets:
Accounts receivable
$
93,100
$
47
$
93,147
Inventory
93,604
186
93,790
Prepaid expenses and other current assets
4,884
54
4,938
Prepaid income taxes
3,217
330
3,547
Accounts receivable, net of current portion
575
23
598
Deferred tax assets
69
1,757
1,826
Other assets
7,820
(69
)
7,751
Total assets
$
444,312
$
2,328
$
446,640
Liabilities:
Accrued expenses and other current liabilities
$
34,567
$
(491
)
$
34,076
Deferred revenue
25,485
8,194
33,679
Deferred revenue, net of current portion
4,583
1,856
6,439
Total liabilities
405,748
9,559
415,307
Stockholders’ Equity:
Accumulated deficit
(127,064
)
(7,231
)
(134,295
)
Total stockholders’ equity
38,564
(7,231
)
31,333
Total liabilities and stockholders’ equity
$
444,312
$
2,328
$
446,640
Total reported assets under ASC 606 as of December 31, 2019 were $2,328 less than the total assets without the adoption of ASC 606 largely due to decreases in deferred tax assets, prepaid income taxes and deferred inventory costs related to contracts for which deferred revenue was adjusted to retained earnings, partially offset by increases in prepaid expenses and other current assets and other assets related to contract costs capitalized under ASC 606 that would have been expensed when incurred under ASC 605. Total reported liabilities under ASC 606 as of December 31, 2019 were $9,559 less than the total liabilities without the adoption of ASC 606 primarily driven by the adjustment of deferred revenue related to a customer contract for which revenue was recognized based on receipt of cash payments under ASC 605 that would have been recognized upon product acceptance under ASC 606, offset by an increase in accrued partner commissions in accrued expenses and other current liabilities. These partner commissions were previously being recognized in the period in which cash was received and revenue was recognized. Upon the adoption of ASC 606, partner commissions are reflected as a cost to obtain a contract and they are expensed consistent with the pattern of revenue recognition on this contract.
Year Ended December 31, 2019
Statement of Operations and Comprehensive (Loss) Income
As Reported under ASC 606
Adjustments
Without adoption of ASC 606
Revenue:
Product
$
241,377
$
(6,201
)
$
235,176
Service
40,920
197
41,117
Total revenue
282,297
(6,004
)
276,293
Cost of revenue:
Product
113,059
182
113,241
Gross profit
162,532
(6,186
)
156,346
Operating expenses:
Selling, general and administrative
88,320
231
88,551
Loss from operations
(9,119
)
(6,417
)
(15,536
)
Other income (expense):
Interest income
4,406
(159
)
4,247
Loss before provision for (benefit from) income taxes
(24,415
)
(6,576
)
(30,991
)
Provision for (benefit from) income taxes
23,791
(1,495
)
22,296
Net loss
(48,206
)
(5,081
)
(53,287
)
Comprehensive loss
$
(49,270
)
$
(5,081
)
$
(54,351
)
Net loss per share attributable to common stockholders:
Basic
$
(0.57
)
$
(0.07
)
$
(0.64
)
Diluted
$
(0.57
)
$
(0.07
)
$
(0.64
) During the year ended December 31, 2019, the adoption of ASC 606 resulted in a net increase to product revenue due to certain contracts for which product revenue was recognized upon delivery that would have been deferred without the adoption of ASC 606 due to the lack of vendor-specific objective evidence.
Year Ended December 31, 2019
Statement of Cash Flows
As Reported under ASC 606
Adjustments
Without adoption of ASC 606
Cash flows used in operating activities:
Net loss
$
(48,206
)
$
(5,081
)
$
(53,287
)
Deferred income taxes
19,641
(1,166
)
18,475
Changes in operating assets and liabilities:
Accounts receivable
1,881
159
2,040
Inventory
(21,276
)
182
(21,094
)
Prepaid expenses and other assets
(3,679
)
(322
)
(4,001
)
Prepaid income taxes
16
(330
)
(314
)
Accrued expenses and other current liabilities
(7,827
)
554
(7,273
)
Deferred revenue
(9,498
)
6,004
(3,494
)
Net cash used in operating activities
$
(39,022
)
$
—
$
(39,022
) During the year ended December 31, 2019, the adoption of ASC 606 resulted in offsetting changes in operating assets and liabilities and had no impact on net cash flow from operations. |
| Stock-Based Compensation | Stock-Based Compensation The Company measures stock options and other stock-based awards granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues stock options with only service-based vesting conditions and records the expense for these awards using the straight-line method. For stock-based awards granted to non-employee consultants, compensation expense is recognized over the period during which services are rendered by such non-employee consultants until completed. At the end of each financial reporting period prior to completion of the service, the fair value of these awards is remeasured using the then-current fair value of the Company’s common stock and updated assumption inputs in the Black-Scholes option-pricing model. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive (loss) income in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. The Company recognizes compensation expense for only the portion of awards that are expected to vest. In developing a forfeiture rate estimate, the Company has considered its historical experience to estimate pre-vesting forfeitures for service-based awards. The impact of a forfeiture rate adjustment will be recognized in full in the period of adjustment, and if the actual forfeiture rate is materially different from the Company’s estimate, the Company may be required to record adjustments to stock-based compensation expense in future periods. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company was a private company until December 14, 2017 and lacks sufficient company-specific historical and implied volatility information for its stock. Therefore, it estimates its expected stock volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company does not have a history of declaring or paying cash dividends, except for the special cash dividends declared in November 2014, June 2016, December 2016, May 2017 and November 2017 and in those circumstances the board of directors approved cash dividends to be paid to holders of the Company’s stock options, stock appreciation rights (“SARs”) and restricted stock units (“RSUs”) upon vesting as an equitable adjustment to the holders of such instruments. The Company has also granted SARs to certain employees, which require the Company to pay in cash upon exercise an amount equal to the product of the excess of the per share fair market value of the Company’s common stock on the date of exercise over the exercise price, multiplied by the number of shares of common stock with respect to which the SAR is exercised. Because these awards may require the Company to settle the awards in cash, they are accounted for as a liability in the Company’s consolidated balance sheets. The liability related to these awards, as well as related compensation expense, is recognized over the period during which services are rendered until completed. Changes in the fair value of the SAR liability are estimated using the Black-Scholes option pricing model and are recorded in the consolidated statements of operations and comprehensive (loss) income. After vesting is completed, the Company will continue to remeasure the fair market value of the liability until the award is either exercised or canceled, with changes in the fair value of the liability recorded in the consolidated statements of operations and comprehensive (loss) income. |
| Research and Development Costs | Research and Development Costs The Company expenses research and development costs as incurred. Costs incurred to develop software to be licensed to customers are expensed prior to the establishment of technological feasibility of the software and are capitalized thereafter until commercial release of the software. The Company has not historically capitalized software development costs as the establishment of technological feasibility typically occurs shortly before the commercial release of its software, which is embedded in its products. As such, all software development costs related to software for license to customers are expensed as incurred and included within research and development expense in the accompanying consolidated statements of operations and comprehensive (loss) income. |
| Advertising Costs | Advertising Costs Advertising costs are expensed as incurred and are included in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive (loss) income. Advertising expenses were not significant for any periods presented. |
| Foreign Currency Translation | Foreign Currency Translation For the Company’s subsidiaries in Ireland and Australia, the U.S. dollar is the functional currency. For each of the Company’s other foreign subsidiaries, the functional currency is its local currency. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using period-end exchange rates, and revenues and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The effects of these foreign currency translation adjustments are included in accumulated other comprehensive (loss) income, a separate component of stockholders’ equity (deficit). Foreign currency transaction gains (losses) are included in the consolidated statements of operations and comprehensive (loss) income as a component of other income (expense) and totaled $298, $(911) and $886 for the years ended December 31, 2019, 2018 and 2017, respectively. |
| Fair Value Measurements | Fair Value Measurements Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1—
Quoted prices in active markets for identical assets and liabilities.
Level 2—
Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities at the measurement date; quoted prices in markets that are not active for identical or similar assets and liabilities; or other inputs that are observable or can be corroborated by observable market data.
Level 3—
Unobservable inputs that involve management judgment and are supported by little or no market activity, including pricing models, discounted cash flow methodologies and similar techniques. The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s cash equivalents, marketable securities, foreign currency forward contracts and SARs are carried at fair value, determined according to the fair value hierarchy described above (see Note 7). The fair values of accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities, with the exception of amounts recorded by the Company as “accounts receivable, non-current,” which represent amounts billed to customers for which payment has not yet become due and for which an offsetting amount of deferred revenue has been recorded. The carrying values of the Company’s debt obligations (see Note 10) as of December 31, 2019 and 2018 approximated their fair values because the debt bears interest at rates the Company would be required to pay on the issuance of debt with similar terms, based on an analysis of recent market conditions and other Company-specific factors. |
| Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities, as measured by enacted tax rates anticipated to be in effect when these differences reverse. This method also requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. As of December 31, 2019, the Company determined that it is more likely than not that a portion of its net U.S. deferred tax assets will not be realized, and thus has recognized a valuation allowance of $39,124 against our net U.S. deferred tax assets that are not expected to be realized, an increase of $35,198 during the year ended December 31, 2019 (see Note 9). The Company records a liability for potential payments of taxes to various tax authorities related to uncertain tax positions and other tax matters. The recorded liability is based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely than not” to be realized. The amount of the benefit that may be recognized in the financial statements is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company establishes a liability, which is included in accrued income taxes in the consolidated balance sheets, for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when the Company believes that certain positions might be challenged despite the Company’s belief that the tax return positions are fully supportable. The recorded liability is adjusted in light of changing facts and circumstances. The provision for (benefit from) income taxes includes the impact of the recorded liability and changes thereto. The Company recognizes interest and penalties related to uncertain tax positions within other income (expense) in the accompanying consolidated statements of operations and comprehensive (loss) income. Accrued interest and penalties are included in accrued income taxes in the consolidated balance sheets. On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted which, among other things, lowered the U.S. corporate income tax rate to 21% from 35%, repealed the domestic production activity deductions, limited the deductibility of certain executive compensation and interest expense, and established a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries. Beginning in 2018, the TCJA also requires a minimum tax on certain future earnings generated by foreign subsidiaries while providing for future tax-free repatriation of such earnings through a 100% dividends-received deduction. While the intent of TCJA was to provide for a territorial tax system, effective for taxable years beginning after January 1, 2018, taxpayers are subjected to the global intangible low-taxed income (“GILTI”) provisions. The GILTI provisions require the Company to currently recognize in U.S. taxable income a deemed dividend inclusion of foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. During the years ended December 31, 2019 and 2018, the Company recorded an income tax charge of $0.9 million and $4.4 million, respectively related to GILTI. The Company has made an accounting policy election, as allowed by the SEC and FASB, to recognize the impacts of GILTI within the period incurred. Therefore, no U.S. deferred taxes are provided on GILTI inclusions of future foreign subsidiary earnings. |
| Comprehensive (Loss) Income | Comprehensive (Loss) Income Comprehensive (loss) income includes net (loss) income as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. Comprehensive (loss) income for the periods presented consists of net income and the change in the cumulative foreign currency translation adjustment. |
| Net (Loss) Income per Share | Net (Loss) Income per Share The Company follows the two-class method when computing net (loss) income per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net (loss) income per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Basic net (loss) income per share attributable to common stockholders is computed by dividing the net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net (loss) income attributable to common stockholders is computed by adjusting net (loss) income attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net (loss) income per share attributable to common stockholders is computed by dividing the diluted net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock-based awards and convertible preferred stock are considered potential dilutive common shares. |
| Impact of Recently Adopted and Issued Accounting Standards | Impact of Recently Adopted Accounting Standards In May 2014, the FASB issued ASC 606, which supersedes existing revenue recognition guidance under GAAP. The core principle of this standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASC 606 on January 1, 2019, using the modified retrospective method. Under this method of adoption, the Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. Comparative prior year periods were not adjusted. As a result of applying the modified retrospective method to adopt ASC 606, the following adjustments were made to the consolidated balance sheet as of January 1, 2019:
December 31, 2018
January 1, 2019
As reported
Adjustments
As adjusted
Assets:
Accounts receivable
$
81,782
$
(153
)
$
81,629
Inventory
50,997
(368
)
50,629
Prepaid expenses and other current assets
3,755
209
3,964
Accounts receivable, net of current portion
2,388
(75
)
2,313
Deferred tax assets
21,578
(592
)
20,986
Other assets
3,293
128
3,421
Total assets
$
474,649
$
(851
)
$
473,798
Liabilities:
Accrued expenses and other current liabilities
$
36,992
$
1,045
$
38,037
Deferred revenue
31,206
(2,190
)
29,016
Deferred revenue, net of current portion
12,479
(1,856
)
10,623
Total liabilities
399,793
(3,001
)
396,792
Stockholders’ equity:
Accumulated deficit
(81,008
)
2,150
(78,858
)
Total stockholders’ equity
74,856
2,150
77,006
Total liabilities and stockholders’ equity
$
474,649
$
(851
)
$
473,798
Upon adoption of ASC 606 on January 1, 2019, the Company recorded a decrease to accumulated deficit of $2,150 as a result of the transition. The impact of the adoption primarily relates to the cumulative effect of a $4,046 total decrease in deferred revenue and deferred revenue, net of current portion primarily related to a customer contract for which revenue was recognized based on receipt of cash payments under ASC 605 that would have been recognized upon product acceptance under ASC 606; a $1,045 increase in accrued expenses and other current liabilities related to partner commissions that were previously being recognized in the period in which cash was received and revenue was recognized, but would have been reflected as a cost to obtain a contract and expensed consistent with the pattern of revenue recognition on the contract; a $368 decrease in inventory related to the adjustment of deferred cost of goods sold on deferred revenue also adjusted as part of the adoption; a $337 total increase in prepaid expenses and other current assets and other assets for short term and long term capitalized contract costs on open contracts as of the adoption date; a $228 total decrease in accounts receivable and accounts receivable, net of current portion related to a contract with a significant financing component; and a $592 decrease in deferred tax assets related to the above items. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is now effective for all entities and the Company has concluded that the adoption of ASU 2016-15 does not have an effect on its consolidated financial statements. In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory Impact of Recently Issued Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates Codification Improvements to Topic 842: Leases Leases (Topic 842), Targeted Improvements Leases (Topic 842) – Narrow-Scope Improvements for Lessors In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments In November 2019, the FASB issued ASU 2019-10 to defer the effective dates of ASU 2016-13. This guidance is now effective for private companies, and emerging growth companies that choose to take advantage of the extended transition periods, for annual reporting periods beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Additionally, in November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU 2018-19”), which mitigates transition complexity by requiring that for nonpublic business entities the amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The amendments in ASU 2018-19 also clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20, but instead, should be accounted for in accordance with Topic 842, Leases. Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments n May 2019, the FASB issued update ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”), which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The Company In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging—Targeted Improvements to Accounting for Hedging Activities In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718) In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement |
