| Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (āGAAPā) for interim financial information. Certain information and disclosures normally included in condensed consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The accompanying condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (āSECā) on February 19, 2021. Certain reclassifications have been made to conform to current period presentation. Principles of Consolidation The condensed consolidated financial statements include all accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated in the accompanying condensed consolidated financial statements. Use of Estimates The preparation of the condensed consolidated financial statements and related disclosures 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 balance sheets and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include revenue recognition, the carrying value of goodwill, the fair value of acquired intangibles, the capitalization of software development costs, the useful lives of intangible assets, share-based compensation, right of use assets, warrant liability, financing and operating lease liabilities, contingent consideration and the valuation allowance of deferred tax assets resulting from net operating losses. COVID-19 Update In December 2019, the emergence of a novel coronavirus, or COVID-19, was reported and in March 2020, the World Health Organization, or WHO, characterized COVID-19 as a pandemic. The broader implications of the global emergence of COVID-19 on the Companyās business, operating results, and overall financial performance continue to remain uncertain and they environment and financial markets, all of which are uncertain and cannot be predicted. Since March 2020, the Company saw certain new and existing customers halt or decrease investment in infrastructure and, although conditions have improved, the Company expects that certain of its current and potential customers will continue to take actions to reduce operating expenses and moderate cash flows, including by delaying sales and requesting extended billing and payment terms. The Company will continue to actively monitor the situation and may take further actions that alter its business operations, as may be required by federal, state, or local authorities, or that the Company determines are in the best interests of its employees, customers, partners, suppliers, and stockholders. Significant Accounting Policies There have been no material changes to the Companyās significant accounting policies previously disclosed in the Companyās Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SEC on February 19, 2021 aside from those described in Note 2. ā Fair Value The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value . ā ā Level 1 ā uses quoted prices in active markets for identical assets or liabilities. ā Level 2 ā uses observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. ā Level 3 ā uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. The Companyās only material financial instruments carried at fair value as of June 30, 2021 and December 31, 2020, with changes in fair value flowing through current earnings, consist of contingent consideration liabilities recorded in conjunction with business combinations and the fair value of its warrant liabilities are as follows: ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā Fair Value Measurement at ā ā ā ā ā Reporting Date Using ā ā ā Quoted Prices in Significant ā ā ā ā ā ā ā Active Markets ā Other ā Significant ā ā Balance as of ā for Identical ā Observable ā Unobservable ā ā June 30, ā Assets ā Inputs ā Inputs ā ā 2021 ā (Level 1) ā (Level 2) ā (Level 3) Contingent consideration ā current ā $ 729 ā $ ā ā $ ā ā $ 729 Contingent consideration ā long term ā 44,880 ā ā ā ā ā 44,880 Warrant liability ā ā 6,607 ā ā ā ā ā ā ā ā 6,607 Total liabilities measured at fair value ā $ 52,216 ā $ ā ā $ ā ā $ 52,216 ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā Fair Value Measurement at ā ā ā ā ā Reporting Date Using ā ā ā Quoted Prices in Significant ā ā ā ā ā ā ā Active Markets ā Other ā Significant ā ā Balance as of ā for Identical ā Observable ā Unobservable ā ā December 31, ā Assets ā Inputs ā Inputs ā ā 2020 ā (Level 1) ā (Level 2) ā (Level 3) Contingent consideration ā current ā $ 743 ā $ ā ā $ ā ā $ 743 Contingent consideration ā long term ā 42,530 ā ā ā ā ā 42,530 Warrant liability ā ā 3,040 ā ā ā ā ā ā ā ā 3,040 Total liabilities measured at fair value ā $ 46,313 ā $ ā ā $ ā ā $ 46,313 ā There were no transfers made among the three levels in the fair value hierarchy during the three and six months ended June 30, 2021. The following tables present additional information about Level 3 liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for liabilities within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs. Changes in contingent consideration liabilities measured at fair value from December 31, 2020 to June 30, 2021 were as follows: ā ā ā ā ā Contingent consideration ā December 31, 2020 $ 43,273 Change in fair value of contingent consideration ā 2,364 Payments of contingent consideration ā ā (28) Contingent consideration ā June 30, 2021 ā $ 45,609 ā On February 19, 2019, the Company consummated several acquisitions (collectively, the āAcquisitionā), pursuant to which it acquired each of Bonfire Questica The fair value of the Companyās contingent consideration liabilities recorded as part of the Acquisition has been classified within Level 3 in the fair value hierarchy. The contingent consideration represents the estimated fair value of future payments due to the sellers based on each companyās achievement of annual earnings targets in certain years and other events considered in certain transaction documents. The fair values of the contingent consideration were calculated through the use of either Monte Carlo simulation or modified Black-Scholes analyses based on earnings projections for the respective earn-out periods, corresponding earnings thresholds, and approximate timing of payments as outlined in the purchase agreements for each of the Acquired Companies. The analyses utilized the following assumptions: (i) expected term; (ii) risk-adjusted net sales or earnings; (iii) risk-free interest rate; and (iv) expected volatility of earnings. Estimated payments, as determined through the respective models, were further discounted by a credit spread assumption to account for credit risk. The contingent consideration is revalued to fair value each period, and any increase or decrease is recorded in operating income (loss). The fair value of the contingent consideration may be impacted by certain unobservable inputs, most significantly with regard to discount rates, expected volatility and historical and projected performance. Significant changes to these inputs in isolation could result in a significantly different fair value measurement. ā ā Changes in the warrant liability measured at fair value from December 31, 2020 to June 30, 2021 were as follows: ā ā ā ā ā Warrant liability ā December 31, 2020 ā $ 3,040 Change in fair value of warrant liability ā 3,567 Warrant liability ā June 30, 2021 ā $ 6,607 ā ā ā ā ā The warrant liability was estimated using a Black-Scholes model derived from a Monte Carlo simulation of the Companyās outstanding public warrants. These inputs were primarily derived from the implied volatility of the traded public warrant price. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and term loans approximates fair value because of the short-term nature of these instruments. The Company measures certain assets at fair value on a non-recurring basis, generally annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include goodwill and other intangible assets. A financial instrumentās categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Disaggregation of Revenues ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā Three Months Ended ā Three Months Ended ā Six Months Ended ā Six Months Ended ā ā ā June 30, ā June 30, ā June 30, ā June 30, ā ā 2021 ā 2020 ā 2021 2020 ā Subscriptions, support and maintenance ā $ 11,333 ā $ 8,434 ā $ 21,498 $ 16,158 ā Professional services ā 2,878 ā 2,458 ā 5,819 5,627 ā License ā 81 ā 243 ā 144 626 ā Asset sales ā 25 ā 29 ā 115 29 ā Total revenues ā $ 14,317 ā $ 11,164 ā $ 27,576 $ 22,440 ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā Revenues Subscription, support and maintenance The Companyās contracts may include variable consideration in the form of usage fees, which are constrained and recognized once the uncertainties associated with the constraint are resolved, which is when usage occurs and the fee is known. Subscription, support and maintenance revenues also include on-premise support or maintenance pertaining to license sales. Revenues from on-premise support are recognized on a straight-line basis over the support period. Revenues from subscription, support and maintenance comprised approximately 79% and 76% of total revenues for the three months ended June 30, 2021 and 2020 and 78% and 72% for the six months ended June 30, 2021 and 2020, respectively. Professional services License. Asset sales. Restructuring Charges On March 30, 2020, the Company implemented a global restructuring plan which resulted in an approximate 10% reduction of the Companyās workforce. This action was intended to streamline the Companyās operational reporting and reduce operating cash outflows. The Company recorded pre-tax restructuring charges of approximately $3.7 million which is comprised of one-time employee termination benefits paid over a weighted-average period of approximately 10 months. All termination benefits associated with the restructuring plan have been paid as of June 30, 2021. Net Loss per Share Net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share of common stock is computed similarly to basic net income per share of common stock except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. Due to the net loss for the three and six months ended June 30, 2021 and 2020, diluted and basic loss per share are the same. Securities that could potentially dilute net loss per share in the future that were not included in the computation of diluted loss per share at June 30, 2021 and 2020 are as follows: ā ā ā ā ā ā ā ā 2021 ā 2020 Warrants to purchase common stock 27,093,334 ā 27,093,334 Unvested restricted stock units 3,676,301 ā 3,333,152 Options to purchase common stock 244,762 ā 251,771 Total 31,014,397 ā 30,678,257 ā Income Taxes In determining the quarterly benefit from income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date loss, adjusted for discrete items arising in that quarter. The Companyās annual estimated effective tax rate differs from the U.S. federal statutory rate of 21% as a result of state taxes, foreign taxes and changes in the Companyās valuation allowance for domestic income taxes. For the three and six months ended June 30, 2021 and 2020, the Company recorded a $(0.1) million, $(0.8) million, $0.1 million, and $1.7 million benefit from (provision for) income taxes, respectively. ā Recently Adopted Accounting Pronouncements On January 1, 2020, the Company adopted Accounting Standards Update (āASUā) No. 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820), which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. The adoption of this new standard did not have a material impact on the Companyās condensed consolidated financial statements. On January 1, 2020, the Company adopted ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) ā Customerās Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract On January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies various aspects related to accounting for income taxes, removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. Recently Issued Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2020-06, DebtāDebt with Conversion and Other Options (Subtopic 470-20) and Derivatives and HedgingāContracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. This guidance will be effective for the Company in the first quarter of 2022 on a full or modified retrospective basis, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. |
