| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies a) Basis of Presentation and Principles of Consolidation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations or if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Therefore, these unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the SEC on March 2, 2023. The information as of December 31, 2022 included in the consolidated balance sheets was derived from those audited consolidated financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. All intercompany transactions and balances have been eliminated in consolidation. Results of operations for the three and six months ended June 30, 2023 and 2022 are not necessarily indicative of the results to be expected for the full annual periods. Certain prior period amounts have been reclassified to conform to current period presentation. The reclassifications had no impact on the Company’s net income, financial position, stockholders’ equity or cash flows as previously reported. b) Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates, and such differences could be material to the Company’s consolidated financial position and results of operations, requiring adjustment to these balances in future periods. Significant items subject to such estimates and assumptions include, but are not limited to, the determination of the useful lives of long-lived assets, period of benefit of deferred sales commissions, allowances for credit losses, fair value of marketable securities, fair value of goodwill and long-lived assets, fair value of incentive awards, fair value of warrants, establishing standalone selling price, valuation of deferred tax assets, income tax uncertainties and other contingencies, including the Company’s ability to exercise its right to repurchase incentive options from terminated employees. c) Segment Information The Company has determined that its Chief Executive Officer (“CEO”) is its chief operating decision maker. The Company’s CEO reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources. Accordingly, the Company has determined that it operates in a single reportable segment. d) Foreign Currency Translation The financial position and results of operations of the Company’s international subsidiaries are measured using the local currency as the functional currency. Revenue and expenses have been translated into U.S. dollars at average exchange rates prevailing during the periods presented. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity (accumulated other comprehensive loss), unless there is a sale or complete liquidation of the underlying foreign investments, or the adjustment is inconsequential. e) Fair Value of Financial Instruments Fair value is defined as the price that would be received from the sale of an asset or the transfer of a liability in an orderly transaction between market participants at the measurement date. The Company utilizes a fair value hierarchy to classify fair value amounts of the Company’s assets and liabilities recognized or disclosed in the Company’s consolidated financial statements based on the lowest level of input that is significant to the fair value measurement. The levels of the hierarchy are described below: • Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2—Includes other inputs that are directly or indirectly observable in the marketplace. • Level 3—Unobservable inputs that are supported by little or no market activity. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions based on the best information available. The Company recognizes transfers into and out of the levels as of the end of each reporting period. Refer to Note 19 for additional information regarding the fair value measurements. f) Liquidity and Capital Resources LiveVox’s consolidated financial statements have been prepared assuming the Company will continue as a going concern for the 12-month period from the date of issuance of the consolidated financial statements, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company’s main sources of liquidity include: • Available-for-sale (“AFS”) debt securities, which are all classified as short-term securities to fund current operations and may be liquidated at the Company’s discretion if the need arises. The Company held AFS debt securities of $43.7 million and $48.2 million as of June 30, 2023 and December 31, 2022, respectively. S ee Note 4 for more information ; • The term loan and revolving credit facility that the Company entered into with PNC Bank on November 7, 2016 (as amended, the “Credit Facility”), which has been amended several times, most recently as of May 31, 2023. As of June 30, 2023, the term loan commitment was $54.5 million, the revolver commitment was $5.0 million and the letter of credit sublimit was $1.5 million. S ee Notes 9 and 10 for more information. The Company’s primary use of cash is for operating and administrative activities including employee-related expenses, and general, operating and overhead expenses. Future capital requirements will depend on many factors, including the Company’s customer growth rate, customer retention, timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the continuing market acceptance of the Company’s services, effective integration of acquisition activities, if any, and maintaining the Company’s bank credit facility. Additionally, the duration and extent of the impact from the current macroeconomic and geopolitical conditions continues to depend on future developments that cannot be accurately predicted at this time, such as a tight labor market, inflationary pressures, rising interest rates, volatility in foreign exchange rates, supply chain constraints, recessionary fears and the specific impact of these and other factors on LiveVox’s business, employees, customers and partners. While those factors have caused operational difficulties, and may continue to create challenges for the Company’s performance, they have not, thus far, had a substantial net impact on the Company’s liquidity position. The Company believes it has sufficient financial resources for at least the next 12 months from the date these consolidated financial statements are issued. g) Debt Discount and Issuance Costs The Company’s debt issuance costs and debt discount are recorded as a direct reduction of the carrying amount of the debt liability and are amortized to interest expense over the contractual term of the term loan. h) Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. The Company limits its credit risk associated with the cash and cash equivalents by placing investments with banks it believes are highly creditworthy. The Company has exposure to credit risk to the extent cash balances exceed amounts covered by Federal deposit insurance. At June 30, 2023 and December 31, 2022, the Company had no restricted cash. Cash and cash equivalents consist of bank deposits and money market funds. i) Marketable Securities The Company invests in various marketable securities. As of June 30, 2023 and December 31, 2022, the Company designated all of these marketable securities as debt securities and classified them as available-for-sale (“AFS”). No debt securities were classified as held-to-maturity (“HTM”) or trading. Debt securities are classified as current or non-current, based on maturities and the Company’s expectations of sales and redemptions in the next 12 months. The Company determines the appropriate classification of marketable securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Debt securities classified as AFS are reported at fair value with unrealized gains and losses, net of income taxes, as a separate component of stockholders’ equity (accumulated other comprehensive loss) in the consolidated balance sheets until the securities are sold or the unrealized losses are related to credit losses. Gains and losses on sales of AFS debt securities are recorded on the trade date in other income (expense), net, in the consolidated statements of operations and comprehensive loss. The cost of AFS debt securities sold or the amount reclassified out of accumulated other comprehensive loss into earnings is determined using the specific identification method. At each reporting date, the Company evaluates the amortized cost of AFS debt securities compared to their fair value to determine whether an AFS debt security is impaired. The Company first assesses whether it intends to sell the security or whether it is more likely than not that the Company will be required to sell the security before the recovery of its entire amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through other income (expense), net, in the consolidated statements of operations and comprehensive loss. If neither of these criteria is met, the Company evaluates whether the decline in fair value below amortized cost basis has resulted from credit losses or other factors. In making this assessment, the Company considers factors such as the extent to which fair value is less than amortized cost basis, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the security. Credit related unrealized losses are recognized as an allowance for credit losses in the consolidated balance sheets with a corresponding charge in other income (expense), net, in the consolidated statements of operations and comprehensive loss. Non-credit related unrealized losses are recorded in other comprehensive income (loss), as applicable, net of applicable taxes. On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all subsequent updates (collectively, the “ASC 326”) and applied to its AFS debt securities. Please refer to Note 2(aa) for more information about ASC 326. See Note 4 for additional information relating to the Company’s marketable securities. In connection with the adoption of new standards, the Company elected to exclude accrued interest from both the fair value and the amortized cost basis of AFS debt securities and present it within prepaid expenses and other current assets in the Company’s consolidated balance sheets. The Company elected not to measure an allowance for credit losses for accrued interest receivable. As such, accrued interest receivable is written off in a timely manner when deemed uncollectible, by reversing previously recognized interest income. j) Accounts Receivable Trade accounts receivable are stated net of any write-offs and the allowance for credit losses, at the amount the Company expects to collect. The Company performs ongoing credit evaluations of its customers and generally does not require collateral unless a customer has previously defaulted. The Company maintains an allowance for credit losses, which represents the best estimate of lifetime expected credit losses against the existing accounts receivable, inclusive of unbilled receivables, based on certain factors including the age of the receivable balance, historical write-off experience, past collection experience with the customer, credit quality of the customer, current economic conditions, and reasonable and supportable forecasts of future economic conditions. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Accounts receivable are charged off against the allowance for credit losses after all means of collection have been exhausted and the potential for recovery is considered remote. Recoveries of accounts receivable previously written off are recorded as income when received. The allowance for credit losses activities for the three and six months ended June 30, 2023 and 2022 are as follows (dollars in thousands): Three Months Ended Six Months Ended June 30, 2023 2022 2023 2022 Balance, beginning of period $ 1,868 $ 1,385 $ 1,459 $ 1,282 Credit loss expense 494 369 907 402 Accounts receivable write-offs — (386) (4) (403) Accounts receivable recoveries — 86 — 173 Balance, end of period $ 2,362 $ 1,454 $ 2,362 $ 1,454 On January 1, 2023, the Company applied ASC 326 to its trade accounts receivable. The Company determined that the allowance for credit losses as of December 31, 2022 recorded under the accounting standards in effect during that period is sufficient and that no additional allowance for credit losses on its trade accounts receivable is required upon adoption of ASC 326. Please refer to Note 2(aa) for more information about ASC 326. k) Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs, including planned major maintenance activities, are charged to expense as incurred. When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are eliminated from the accounts and any gain or loss is reflected in the consolidated statements of operations and comprehensive loss. Amortization expense on capitalized software is included in depreciation expense. Depreciation of leasehold improvements is recorded over the shorter of the estimated useful life of the leasehold improvement or lease terms that are reasonably assured. Depreciation of property and equipment is provided using the straight-line method based on the following estimated useful lives: Years Computer equipment 3 - 5 Computer software 3 Furniture and fixtures 5 - 10 Leasehold improvements 5 Website development 2 l) Identified Intangible Assets On March 21, 2014, LiveVox, Inc. and subsidiaries were acquired by LiveVox Holdings, Inc. On October 16, 2019, the Company acquired the rights to certain assets of Teckst Inc. On December 16, 2019, the Company acquired the rights to Speech IQ, LLC. On February 5, 2021, the Company completed its asset acquisition of BusinessPhone. The acquisitions resulted in identified marketing-based, technology-based, customer-based, trademark-based, and workforce-based intangible assets. The fair value of the identified assets was determined as of the date of the acquisition by management with the assistance of an independent valuation firm. The identified intangible assets are being amortized using the straight-line method based on the following estimated useful lives: Years Marketing-based 7 Technology-based 4 - 10 Customer-based 7 - 16 Trademark-based 4 Workforce-based 10 m) Goodwill Goodwill represents the excess of the purchase price of acquired business over the fair value of the underlying net tangible and intangible assets. The Company performs its annual impairment review of goodwill on October 1 of each year, and when a triggering event occurs between annual impairment tests. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine if it is more likely than not that the fair value of the Company’s single reporting unit is less than its carrying amount, including goodwill, or bypass the qualitative assessment and proceed directly to the quantitative impairment test in accordance with Accounting Standards Codification (“ASC”) 350-20-35, as amended by ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , to determine if the fair value of the reporting unit exceeds its carrying amount. If the fair value is determined to be less than the carrying value, an impairment charge is recorded for the amount by which the reporting unit’s carrying amount exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. During the three and six months ended June 30, 2023 and 2022, no triggering events have occurred that would require an impairment review of goodwill outside of the required annual impairment review, and therefore, no impairment charges were recorded during those periods. Refer to Note 6 for more information. n) Impairment of Long-Lived Assets Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset and long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value. On January 30, 2023, the Company announced the closure of certain underutilized physical offices within the United States as more of the Company’s employees shift to a hybrid or remote work environment. During the six months ended June 30, 2023, the Company recognized an impairment charge of $0.5 million to reflect the write-down of the carrying amount excess over the fair value of the right-of-use asset for the offices closed. No impairment losses were recognized during the three months ended June 30, 2023 or the three and six months ended June 30, 2022. o) Amounts Due to Related Parties In the ordinary course of business, the Company has a nd expects to continue to have transactions with its stockh olders and affiliates. Refer to Note 11 for more information. p) Concentration of Risk Concentration of Credit and Customer Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and accounts receivable. Risks associated with cash and cash equivalents and marketable securities are mitigated using what the Company considers creditworthy institutions. The Company performs ongoing credit evaluations of its customers’ financial condition. Substantially all of the Company’s assets are in the United States. As of June 30, 2023 and December 31, 2022, no single issuer represented more than 10% of the Company’s marketable securities. The Company’s customers are primarily in the receivables management, tele-sales and customer care industries. During the three and six months ended June 30, 2023 and 2022, substantially all the Company’s revenue was generated in the United States. For the three and six months ended June 30, 2023 and 2022, no single customer represented more than 10% of the Company’s revenue. As of June 30, 2023 and December 31, 2022, no single customer represented more than 10% of the Company’s accounts receivable. Concentration of Supplier Risk The Company relies on third parties for telecommunication, bandwidth, and co-location services that are included in cost of revenue. As of June 30, 2023, two vendors accounted for approximately 33.4% of the Company’s accounts payable. No other single vendor exceeded 10% of the Company’s accounts payable at June 30, 2023. At December 31, 2022, one vendor accounted for approximately 37.7% of the Company’s accounts payable. No other single vendor exceeded 10% of the Company’s accounts payable at December 31, 2022. The Company believes there could be a material impact on future operating results should a relationship with an existing significant supplier cease. q) Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers . The Company derives substantially all of its revenue by providing cloud-based contact center products under a usage-based model, with prices calculated on a per-call, per-seat, or, more typically, a per-minute basis and contracted minimum usage in accordance with the terms of the underlying agreements. Other immaterial ancillary revenue is derived from call recording, local caller identification packages, performance/speech analytics, text messaging services and professional services billed monthly on primarily usage-based fees and, to a lesser extent, fixed fees. Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those services excluding amounts collected on behalf of third parties such as sales taxes, which are collected on behalf of and remitted to governmental authorities based on local tax law. The Company determines revenue recognition through the following steps: a. Identification of the contract, or contracts, with a customer; b. Identification of the performance obligations in the contract; c. Determination of the transaction price; d. Allocation of the transaction price to the performance obligations in the contract; and e. Recognition of revenue when, or as, the performance obligations are satisfied. The Company enters into contracts that can include various combinations of services, each of which are distinct and accounted for as separate performance obligations. The Company’s cloud-based contact center solutions typically include a promise to provide continuous access to its hosted technology platform solutions through its data centers. Arrangements with customers do not provide the customer with the right to take possession of the Company’s software platform at any time. LiveVox’s performance obligations are satisfied over time as the customer simultaneously receives and consumes the benefits and the Company performs its services. The Company’s contract terms typically range from one The Company’s arrangements typically include monthly minimum usage commitments and specify the rate at which the customer must pay for actual usage above the monthly minimum. Additional usage in excess of contractual minimum commitments is deemed to be specific to the month that the usage occurs, since the minimum usage commitments reset at the beginning of each month. The Company has determined these arrangements meet the variable consideration allocation exception and therefore, it recognizes contractual monthly commitments and any overages as revenue in the month they are earned. The Company has service-level agreements with customers warranting defined levels of uptime reliability and performance. Customers may receive credits or refunds if the Company fails to meet such levels. If the services do not meet certain criteria, fees are subject to adjustment or refund representing a form of variable consideration. The Company records reductions to revenue for these estimated customer credits at the time the related revenue is recognized. These customer credits are estimated based on current and historical customer trends, and communications with its customers. Such customer credits have not been significant to date. For contracts with multiple performance obligations, the Company allocates the contract price to each performance obligation based on its relative standalone selling price (“SSP”). The Company generally determines SSP based on the prices charged to customers. In instances where SSP is not directly observable, such as when the Company does not sell the service separately, the SSP is determined using information that generally includes market conditions or other observable inputs. Professional services for configuration, system integration, optimization or education are billed on a fixed-price or time and material basis and are performed by the Company directly or, alternatively, customers may also choose to perform these services themselves or engage their own third-party service providers. Professional services revenue, which represents approximately 2.0% of revenue, is recognized over time as the services are rendered. Deferred revenue represents billings or payments received in advance of revenue recognition and is recognized upon transfer of control. Balances consist primarily of annual or multi-year minimum usage agreements not yet provided as of the balance sheet date. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as deferred revenue, current in the consolidated balance sheets, with the remainder recorded as deferred revenue, net of current in the Company’s consolidated balance sheets. r) Costs to Obtain Customer Contracts (Deferred Sales Commissions) Sales commissions are paid for initial contracts and expansions of existing customer contracts. Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which the Company has estimated to be five years. The Company determined the period of benefit by taking into consideration the length of the Company’s customer contracts, the customer attrition rate, the life of the technology provided and other factors. Amortization expense is recorded in sales and marketing expense within the Company’s consolidated statements of operations and comprehensive loss. Amortization expense for the three months ended June 30, 2023 and 2022 was $0.9 million and $0.8 million, respectively, and for the six months ended June 30, 2023 and 2022 was $1.8 million and $1.5 million, respectively. No impairment losses were recognized during the three and six months ended June 30, 2023 and 2022. s) Advertising The Company expenses non-direct response advertising costs as they are incurred. There were no advertising costs capitalized during the three and six months ended June 30, 2023 and 2022. Advertising expense for the three months ended June 30, 2023 and 2022 was $0.7 million and $1.1 million, respectively, and for the six months ended June 30, 2023 and 2022 was $1.2 million and $1.7 million, respectively. Advertising expense is included under sales and marketing expense in the accompanying consolidated statements of operations and comprehensive loss. t) Research and Development Costs Research and development costs not related to the development of internal use software are charged to operations as incurred. Research and development expenses primarily include payroll and employee benefits, consulting services, travel, and software and support costs. u) Software Development Costs The Company capitalizes costs of materials, consultants, payroll, and payroll-related costs of employees incurred in developing internal-use software after certain capitalization criteria are met and includes these costs in the computer software . Refer to Note 5 for additional information. Software development costs are expensed as incurred until preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that the project will be completed, and the software will be used as intended. To date, all software development costs have been charged to research and development expense in the accompanying consolidated statements of operations and comprehensive loss. There were no capitalized software development costs related to internal-use software during the three and six months ended June 30, 2023 and 2022. v) Income Taxes Deferred Taxes The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences arising from the temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will be paid or refunds received, as provided for under currently enacted tax law. A valuation allowance is provided for deferred tax assets that, based on available evidence, are not expected to be realized. Enactment of the Tax Cuts and Jobs Act in 2017 subjects a U.S. shareholder to current tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. Under U.S. GAAP, an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI resulting from those items in the year of the GILTI inclusion (i.e., as a period expense). The Company has elected to recognize the tax on GILTI as a period expense in the period of inclusion. As such, no deferred taxes are recorded on the Company’s temporary differences that might reverse as GILTI in future years. Uncertain Tax Positions The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained in a court of last resort. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company does not believe its consolidated financial statements include any uncertain tax positions. It is the Company’s policy to recognize interest and penalties accrued on any unrecognized tax benefit as a component of income tax expense. w) Stock-Based Compensation The Company measures compensation expense for stock awards granted to employees and non-employees in accordance with ASC 718, Compensation—Stock Compensation . Stock-based compensation is measured at fair value on grant date. The Company classified all stock awards as equity awards at the grant date, and reassesses the liability versus equity treatment on a quarterly basis for any changes that have occurred during the period presented that may result in a reclassification. Equity-classified awards are recognized as stock-based compensation expense over an employee’s requisite service period or a non-employee’s vesting period on the basis of the grant date fair value. The Company elects to account for forfeitures as they occur, rather than making estimates of future forfeitures. Management Incentive Units During 2019, LiveVox TopCo established a Management Incentive Unit program whereby the LiveVox TopCo board of directors has the power and discretion to approve the issuance of Class B Units that represent management incentive units (“MIUs”) to any manager, director, employee, officer or consultant of the Company or its subsidiaries. Vesting begins on the date of issuance, and the MIUs vest ratably over five years with 20% of the MIUs vesting on each anniversa |
