Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles of Consolidation Unaudited Interim Condensed Consolidated Financial Statements Use of Estimates Marketable Securities Revenue Recognition — Revenue from the Company’s LogMeIn premium services is recognized on a daily basis over the subscription term as the services are delivered, provided that there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured. Subscription periods range from monthly to five years, but are generally one year in duration. The Company’s software cannot be run on another entity’s hardware nor do customers have the right to take possession of the software and use it on their own or another entity’s hardware. The Company’s multi-element arrangements typically include subscription and professional services, which may include development services. The Company evaluates each element within the arrangement to determine if they can be accounted for as separate units of accounting. If the delivered item or items have value to the customer on a standalone basis, either because they are sold separately by any vendor or the customer could resell the delivered item or items on a standalone basis, the Company has determined that the deliverables within these arrangements qualify for treatment as separate units of accounting. Accordingly, the Company recognizes revenue for each delivered item or items as a separate earnings process commencing when all of the significant performance obligations have been performed and when all of the revenue recognition criteria have been met. Professional services revenue recognized as a separate earnings process under multi-element arrangements has been immaterial to date. In cases where the Company has determined that the delivered items within its multi-element arrangements do not have value to the customer on a stand-alone basis, the arrangement is accounted for as a single unit of accounting and the related consideration is recognized ratably over the estimated customer life, commencing when all of the significant performance obligations have been delivered and when all of the revenue recognition criteria have been met. Revenue from arrangements that are accounted for as a single unit of accounting has been immaterial to date. Revenues are reported net of applicable sales and use tax, value-added tax, and other transaction taxes imposed on the related transaction. Concentrations of Credit Risk and Significant Customers — As of December 31, 2014, one customer accounted for 15% of accounts receivable and there were no customers that represented 10% or more of revenue. For the three and nine months ended September 30, 2014 and 2015, no customers accounted for more than 10% of revenue. As of September 30, 2015, no customers accounted for more than 10% of accounts receivable. Goodwill Long-Lived Assets and Intangible Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including intangible assets, may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this comparison indicates that there is impairment, the amount of the impairment is calculated as the difference between the carrying value and fair value. The Company did not record any impairments for the nine months ended September 30, 2015. Foreign Currency Translation — Stock-Based Compensation — with-or-without Income Taxes The Company evaluates its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings is more likely than not to be realized. Potential interest and penalties associated with any uncertain tax positions are recorded as a component of income tax expense. As of both December 31, 2014 and September 30, 2015, the Company has provided for a liability of $0.7 million for uncertain tax positions. These uncertain tax positions would impact the Company’s effective tax rate if recognized. Segment Data The Company’s revenue by geography (based on customer address) and by service cloud (product grouping) is as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2014 2015 2014 2015 United States $ 38,831 $ 48,721 $ 107,701 $ 137,194 United Kingdom 5,028 5,683 14,353 15,692 International—all other 14,203 15,169 40,003 42,630 Total revenue $ 58,062 $ 69,573 $ 162,057 $ 195,516 Three Months Ended September 30, Nine Months Ended September 30, 2014 2015 2014 2015 Collaboration cloud $ 16,840 $ 22,930 $ 44,873 $ 63,148 IT Management cloud 19,501 23,718 54,193 65,718 Customer Engagement cloud 20,953 22,363 61,345 64,783 Other 768 562 1,646 1,867 Total revenue $ 58,062 $ 69,573 $ 162,057 $ 195,516 Guarantees and Indemnification Obligations — In the ordinary course of business, the Company enters into agreements with certain customers that contractually obligate the Company to provide indemnifications of varying scope and terms with respect to certain matters including, but not limited to, losses arising out of the breach of such agreements, from the services provided by the Company or claims alleging that the Company’s products infringe third-party patents, copyrights, or trademarks. The term of these indemnification obligations is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these indemnification obligations is, in many cases, unlimited. Through September 30, 2015, the Company has not experienced any losses related to these indemnification obligations. Net Income Per Share The Company excluded the following options to purchase common shares and restricted stock units from the computation of diluted net income per share because they had an anti-dilutive impact (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2014 2015 2014 2015 Options to purchase common shares 55 — 418 — Restricted stock units 146 238 75 238 Total options and restricted stock units 201 238 493 238 Basic and diluted net income per share was calculated as follows (in thousands, except per share data): Three months ended September 30, Nine months ended September 30, 2014 2015 2014 2015 Basic: Net income $ 2,308 $ 5,563 $ 4,642 $ 8,323 Weighted average common shares outstanding, basic 24,592 24,955 24,382 24,733 Net income per share, basic $ 0.09 $ 0.22 $ 0.19 $ 0.34 Diluted: Net income $ 2,308 $ 5,563 $ 4,642 $ 8,323 Weighted average common shares outstanding 24,592 24,955 24,382 24,733 Add: Common stock equivalents 612 813 723 945 Weighted average common shares outstanding, diluted 25,204 25,768 25,105 25,678 Net income per share, diluted $ 0.09 $ 0.22 $ 0.18 $ 0.32 Recently Issued Accounting Pronouncements — Revenue from Contracts with Customers On June 19, 2014, the FASB issued ASU 2014-12, Stock Compensation Compensation — Stock Compensation On August 27, 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern On February 18, 2015, the FASB issued ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis On April 7, 2015, the FASB issued ASU 2015-03, Interest- Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs On April 15, 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement |