| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"), and include our accounts and those of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management periodically evaluates such estimates and assumptions for continued reasonableness. In particular, we make estimates with respect to the fair value allocation of multiple elements in revenue recognition, the uncollectible accounts receivable, valuation of long-lived assets, stock-based compensation expense and income taxes. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. Actual results could differ from those estimates. Segments We operate as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, who is the Chief Executive Officer, in deciding how to allocate resources and assessing performance. While we have offerings in multiple market segments, our business operates in one operating segment because our chief operating decision maker evaluates our financial information and resources and assesses the performance of these resources on a consolidated basis. Since we operate in one operating segment, all required financial segment information can be found in the consolidated financial statements. Foreign Currency Translation The functional currency of our non-U.S. subsidiaries is the local currency. Asset and liability balances denominated in non-U.S. dollar currencies are translated into U.S. dollars using period-end exchange rates, while revenue and expenses are based upon the exchange rate at the time of the transaction, if known, or at the average rate for the period. Differences are included in stockholders’ equity as a component of accumulated other comprehensive loss. Financial assets and liabilities denominated in currencies other than the functional currency are recorded at the exchange rate at the time of the transaction and subsequent gains and losses related to changes in the foreign currency are included in other income (expense), net in the accompanying consolidated statements of operations. Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less from date of purchase to be cash equivalents. Restricted Cash Restricted cash at December 31, 2017 and 2016 includes $784,000 and $308,000 , respectively, which is used as collateral for letters of credit and bank guarantees issued in relation to certain leases and $0 and $364,000 , respectively, of collateral used to secure credit cards which may not be used or transferred until the restriction is released by the issuing bank. Fair Value of Financial Instruments Assets and liabilities recorded at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows: • Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2: Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices 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 assets or liabilities. • Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. For certain financial instruments, including cash and cash equivalents, accounts receivable and payable, as well as certain accrued liabilities, the recorded amount approximates estimated fair value due to their relatively short maturity period. Short-term investments consist of investments in marketable equity securities that are classified as available-for-sale and recognized at fair value using Level 1 and Level 2 inputs. Concentration of Credit and Other Risks Financial instruments that potentially subject us to concentration of credit risk consist principally of trade receivables. Our trade receivables mainly result from subscription to our software products and professional services provided to our customers that are located primarily in the United States and Western Europe. We review the need for allowances for potential losses from these trade receivables. At December 31, 2017 and 2016 , the allowance for doubtful accounts was $527,000 and $446,000 , respectively. For all periods presented, the allowance for doubtful accounts activity was not significant. No single customer accounted for ten percent or more of trade receivables as of December 31, 2017 and 2016 . No single customer accounted for ten percent or more of total revenue for the years ended December 31, 2017 , 2016 , and 2015 . We are dependent upon third parties, such as AWS, in order to meet the uptime and performance requirements of our customers. Property and Equipment, Net Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method based on the estimated useful lives of three years for assets other than leasehold improvements. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the assets; generally three years . Goodwill and Intangible Assets Goodwill is measured as the excess of consideration transferred and the fair value of net assets acquired and liabilities assumed in a business combination. Goodwill is not amortized, but is tested for impairment at least annually or as circumstances indicate that its value may no longer be recoverable. To assess if goodwill is impaired, we first perform a qualitative assessment to determine whether further impairment testing is necessary. If, as a result of the qualitative assessment, we consider it more likely than not that the fair value of a reporting unit is less than its carrying amount, we perform a quantitative impairment test. We perform our goodwill impairment test annually in the fourth fiscal quarter, and the last impairment test was completed for the year ended December 31, 2017 and it was determined that the fair value was significantly in excess of the carrying value. The guidance for goodwill and other intangible assets requires impairment testing based on reporting units. We periodically reevaluate the business and determined that we continue to operate in one segment, which is also considered the sole reporting unit. Therefore, goodwill was tested and will continue to be tested for impairment at the consolidated level. To date, we have determined that there has been no impairment of goodwill. Impairment of Long-Lived Assets Our long-lived assets, such as property and equipment and intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. There were no impairment charges for any of the periods presented. Software Development Costs Development costs included in the research and development of new software products are expensed as incurred until technological feasibility of the product has been established. Software development costs incurred after technological feasibility has been established are capitalized up to the time the product is available for general release to customers. For the years ended December 31, 2017 and 2016 , there were no amounts capitalized as our current development process is essentially completed concurrent with the establishment of technological feasibility. We incur costs related to software acquired, developed or modified solely to meet our internal requirements. Costs incurred during the preliminary planning and evaluation stage of the project and during the post implementation operational stage are expensed as incurred. Costs incurred during the application development stage of the project are capitalized. We define the design, configuration, and coding process as the application development stage. We did no t capitalize any costs related to computer software developed for internal use during the years ended December 31, 2017 , 2016 , and 2015 . Revenue Recognition We recognize revenue from the following sources: (1) subscription and support revenue, which is comprised of subscription fees from customers accessing our cloud-hosted software and from term-based licenses of our software and support services; (2) professional services and other revenue, which consists primarily of fees associated with consulting and training services related to the implementation and configuration of our platform and (3) royalty revenue from customers incorporating our software in their products. On sales through our channel partners, we recognize revenue on a “sell in” basis as our contractual relationships with our channel partners do not depend on the sale of our products and services to their customers and payment from the channel partner is not contingent on receiving payment from the end customer. The contractual relationships with our channel partners do not allow returns, rebates, or price concessions. We recognize revenue net of sales taxes and other applicable taxes when all of the following criteria are met: there is persuasive evidence of an arrangement, delivery has occurred or service has been performed, the fee is fixed or determinable, and collectability is probable. Subscription Revenue from Cloud-Hosted Software Subscription revenue from cloud-hosted software is recognized ratably over the subscription period. Subscription and Support Revenue from Software Licenses Software licenses for our enterprise software are sold with support services and are generally offered with one -year base subscription periods. The base license subscription generally entitles the end user to the technology itself and post-contract customer support consisting of a specified level of customer support bug fixes, functionality enhancements to the technology, and upgrades to new versions of the technologies, each on a when-and-if available basis, during the term of the subscription. Revenue is recorded ratably over the subscription term as we have not established VSOE for such offerings. Professional Services and Other Revenue Professional services and other revenue is comprised of revenue earned for consulting and training services related to the implementation and configuration of our platform and royalty revenue. Professional services revenue is generally recognized as the services are rendered for time and material contracts, or on a proportional performance basis for fixed price contracts. The majority of our professional services contracts are on a time and materials basis and have standalone value. For professional services that are part of a multiple-element software arrangement, where VSOE of fair value does not exist for all undelivered elements, the professional services revenue is recognized over the term of the subscription. We classify reimbursements received from customers for out-of-pocket expenses as a component of revenue. Royalty revenue is comprised of royalty fees received from customers who have our products incorporated in their own products. Revenue is recognized when the sale to the end customer is reported to us. Multiple-Element Arrangements For multiple-element arrangements containing cloud hosted subscription and non-software services, we: (1) determine whether each element constitutes a separate unit of accounting; (2) determine the fair value of each element using the selling price hierarchy of VSOE of selling price, third party evidence (TPE) of selling price or best estimated selling price (BESP), as applicable; and (3) allocate the total non-contingent fee to each separate unit of accounting based on the relative selling price method. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within our control. As we have been unable to establish VSOE or TPE for the elements of our arrangements, we determine BESP by considering overall pricing objectives and market conditions. Significant pricing practices taken into consideration include our discounting practices, the size and volume of our transactions, our price lists, our go-to-market strategy, historical standalone sales, and contract prices. As our go-to-market strategies evolve, the pricing practices may be modified in the future, which could result in changes in relative selling prices, including BESP, and therefore, the allocation of the selling price to an element. The consideration allocated to subscription and support is recognized as revenue over the contract period commencing when the subscription service is made available to the customer. The consideration allocated to professional services is recognized as revenue using the proportional performance method or as services are delivered for time and material contracts. The total arrangement fee for a multiple element arrangement is allocated based on the relative BESP of each element. However, since the professional services are generally completed prior to completion of delivery of subscription and support services, the revenue recognized for professional services in a given reporting period does not include fees subject to delivery of subscription and support services. This results in the recognition of revenue for professional services that is generally no greater than the contractual fees for those professional services. For multiple-element arrangements that include only software licenses and software related post-contract support, training, and/or consulting, we allocate and defer revenue for each undelivered element of these arrangements based on VSOE. As we have not yet established VSOE of fair value for our software licenses and support, we recognize revenue for these arrangements on a ratable basis over the term of the subscription product with which it is bundled. We have certain multiple element transactions that include both non-software and software elements. For these types of transactions, we allocate the total price to each separate unit of accounting based on the relative selling price method described above. For non-software elements, the revenue is recognized when revenue recognition criteria are met for each element. For subscription elements, we recognize revenue over the subscription term when revenue recognition criteria have been met. Deferred Revenue Deferred revenue consists of billing or payments received in advance of revenue recognition generated from subscription to our cloud hosted software, software licenses, and support as well as payments for unused training and consulting services. Software licenses and subscription to cloud hosted software, support, training, and consulting services are generally paid for in full 30 to 60 days after the invoice date. Cost of Revenue Cost of revenue for subscription and support revenue consists primarily of cloud-hosting costs and personnel-related costs of our customer support organization, including salaries, commissions, benefits, bonuses and stock-based compensation, as well as contractor costs to supplement our staff levels, third-party software royalties and allocated overhead. Cost of revenue for professional services and other revenue consists primarily of personnel-related costs of our professional services and training departments, including salaries, commissions, benefits, bonuses and stock-based compensation, contractor costs to supplement our staff levels and allocated overhead. Research and Development Research and development costs are expensed as incurred. Research and development expenses consist primarily of personnel-related costs for the design and development of our platform and technologies, contractor costs to supplement our staff levels, third-party web services, consulting services, and allocated overhead. Advertising Expenses Advertising costs are expensed when incurred and are included in operating expenses in the accompanying consolidated statements of operations. Advertising expense was $11.8 million , $7.3 million , and $4.9 million for the years ended December 31, 2017 , 2016 , and 2015 , respectively. Stock-Based Compensation We measure stock-based compensation cost for equity instruments granted to employees based upon the estimated fair value of the award at the date of grant. We estimate the fair value of stock options, shares under our employee stock purchase plan and employee stock purchase rights using the Black-Scholes option-pricing model, which requires us to estimate expected term, expected volatility, risk-free interest rate, and dividend yield. For stock options and shares under our employee stock purchase plan, we use the simplified method in developing an estimate of the expected term of the stock options, which is calculated as the average of the time to vesting and the contractual life of the options. The expected term of employee stock purchase rights represents the contractual term of the underlying program. We compute the expected volatility assumption based on blended volatility of our peer companies. Due to the short period that our stock has been publicly traded, we believe our peer company volatility is more representative of our future stock price trends than our historical volatility. The risk-free interest rate is based on the average interest rate for U.S. Treasury instruments whose term is consistent with the expected term. As we have not declared dividends for any period presented, and do not anticipate doing so in the future, the dividend yield is estimated at 0% . For restricted stock units, fair value is based on the closing price of our common stock on the grant date. Compensation cost resulting from this valuation for restricted stock units is recognized in the consolidated statement of operations on a straight-line basis over the period during which an employee provides the requisite service in exchange for the award. Compensation cost resulting from this valuation for shares under our employee stock purchase plan is recognized on an accelerated basis. Income Taxes Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts or existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment. We record a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not. We measure and recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the merits of the position. Net Loss Per Share Attributable to Common Stockholders For the year ended December 31, 2017 , our basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Diluted net loss per share is the same as basic net loss per share since the effect of potentially dilutive securities is anti-dilutive. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Shares of Class B common stock may be converted into Class A common stock at any time at the option of the stockholder on a one -for-one basis, and are automatically converted into Class A common stock upon sale or transfer, subject to certain limited exceptions. Shares of Class A common stock are not convertible. Net loss attributable to common stockholders for the year ended December 31, 2016 is calculated as net loss for the period plus the deemed dividend on common stock related to shares of convertible preferred stock that was sold by holders following conversion to common stock. The deemed dividend represents the excess of the sale price of the converted preferred stock over the fair value of our common stock. For the year ended December 31, 2015 , our basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been or will be incurred and the amount of the liability can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Recently Adopted Accounting Standards In November 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash . ASU 2016-18 requires that the statement of cash flows explains the change during the period in the total cash, cash equivalents, and restricted cash. The standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. We have early adopted ASU 2016-18 and, accordingly, amounts generally described as restricted cash are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the accompanying consolidated statements of cash flows. We have adopted ASU 2016-18 retrospectively and have revised the prior period cash flow from investing activities, beginning cash balance, and ending cash balance to reflect the change in presentation of restricted cash. Other than the change in presentation in the accompanying consolidated statements of cash flows, the adoption of this pronouncement had no effect on our financial position, results of operations, or liquidity. In March 2016, the FASB issued ASU 2016-09 , Compensation—Stock Compensation (Topic 718): Improvements to Employee Share - Based Payment Accounting , which simplifies the accounting and reporting of share-based payment transactions, including adjustments to how excess tax benefits and a company’s payments for tax withholdings should be classified. The new standard is effective for annual periods beginning after December 15, 2016. Other than the change in presentation in the accompanying consolidated statements of cash flows, the adoption of this pronouncement had no material effect on our financial position, results of operations, or liquidity. In January 2017, the FASB issued ASU 2017-04, Intangibles (Topic 350) Simplifying the Test for Goodwill Impairment , which amends the guidance used in evaluating impairment of goodwill. The guidance eliminates Step 2 from the goodwill impairment test. An entity should now perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount that the carrying amount exceeds the fair value. Any reporting units with a zero or negative carrying amount no longer are required to perform qualitative assessments for goodwill impairment. Application of ASU 2017-04 is expected to reduce the cost and complexity of evaluating goodwill for impairment. We have adopted ASU 2017-04 for fiscal year ended December 31, 2017. The adoption of this pronouncement had no effect on our financial position, results of operations, or liquidity. Accounting Standards Update No. 2014-09: Revenue from Contracts with Customers, Not Yet Adopted In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606, or ASC 606) (ASU 2014-09). This standard establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. ASU 2014-09 is effective for us the first quarter of fiscal 2018. We have also considered the impact of the guidance in Accounting Standards Codification (ASC) 340-40, Other Assets and Deferred Costs; Contracts with Customers, under ASU 2014-09. Under our current accounting policy, we do not capitalize sales commission costs and recognize these costs when they are incurred. Under ASC 340-40, we will be required to capitalize and amortize certain sales commission costs by recording the expense over 4 years , the period in which we expect to benefit from the sales efforts. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). We will adopt the standard using the full retrospective method and restate each period presented. In preparation for adoption of the standard, we are in the process of implementing certain internal controls and key system functionality to enable the preparation of financial information and have reached conclusions on key accounting assessments related to the standard. The most significant impact of the standard relates to our accounting for term-based software license revenue related to certain products where we do not provide a hosting service. Under the standard we will recognize revenue related to the software license at delivery rather than ratably over the subscription term. The timing of the revenue recognized attributable to professional services will also be impacted by the standard, for we will no longer be limited to recognizing services revenue based upon the amount of services billed to the customer. We pay commissions to our sales representatives as compensation for obtaining subscription and support contracts as well as professional services contracts. Under ASC 606, we will be required to capitalize all commission costs which are considered an incremental cost of obtaining the contracts and amortize those costs over the expected period of benefit. These capitalized costs will be periodically reviewed for impairment. We continue to evaluate the impact of related disclosures required upon adoption. The quantitative ranges provided below are estimates of the expected effects of our adoption of ASC 606 and its impact on our accounting for commission costs under ASC 340-40. These ranges represent our best estimates of the effects of adopting ASC 606 at the time of the preparation of this Annual Report on Form 10-K. The actual impact is subject to change from these reasonable estimates. Consolidated Statement of Operations Total revenue Under the new guidance, we expect that revenue previously reported will be reduced between 1% and 4% for the year ended December 31, 2017 and the impact will be nominal for the year ended December 31, 2016, primarily due to the recognition of revenue related to the software license at the time the license is delivered instead of ratably over the subscription period. Sales and marketing expenses Under the new guidance, we expect that our previously reported sales and marketing expense will be reduced between 12% and 15% for the years ended December 31, 2017 and 2016, primarily due to the capitalization of commission expense. As discussed above, under ASC 606 certain commissions costs are required to be capitalized and the resulting asset is amortized to expense as we transfer the related services to the customer. These assets will be periodically assessed for impairment. |
