Significant Accounting Policies | 3. Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include all subsidiaries and entities that are controlled by the Company. The results of operations for companies acquired are included in the consolidated financial statements from the effective date of acquisition. All intercompany accounts and transactions have been eliminated in the financial statements. Because of the significance of the Joint Venture to the Company’s financial position and results of operations, the Company is required to provide consolidated financial statements of the Joint Venture pursuant to Rule 3-09 of Regulation S-X. Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates on historical experience, current business factors and various other assumptions that the Company believes are necessary to consider in order to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of expenses and disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic, environmental and political factors and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in the reported results of operations; and if material, the effects of changes in estimates are disclosed in the notes to the financial statements. Estimates and assumptions by management affect: the allowance for doubtful accounts; the fair value assigned to assets acquired and liabilities assumed in business combinations; tax receivable agreement obligations; the fair value of interest rate cap agreement obligations; measurement of the components of tangible equity units; contingent consideration; loss accruals; the carrying value of the Company’s investments; the carrying value of long-lived assets (including goodwill and intangible assets); the amortization period of long-lived assets (excluding goodwill); the carrying value, capitalization and amortization of software development costs; the provision and benefit for income taxes and related deferred tax accounts; certain accrued expenses; revenue recognition; contingencies; and the value attributed to equity awards; the provision and benefit for income taxes and related deferred tax accounts; certain accrued expenses. Business Combinations The Company recognizes the consideration transferred (i.e., purchase price) in a business combination, as well as the acquired business’ identifiable assets, liabilities and noncontrolling interests at their acquisition date fair value. The excess of the consideration transferred over the fair value of the identifiable assets, liabilities and noncontrolling interest, if any, is recorded as goodwill. Any excess of the fair value of the identifiable assets acquired and liabilities assumed over the consideration transferred, if any, is generally recognized within earnings as of the acquisition date. The fair value of the consideration transferred, assets, liabilities and noncontrolling interests is estimated based on one or a combination of income, costs or market approaches as determined based on the nature of the asset or liability and the level of inputs available to the Company (i.e., quoted prices in an active market, other observable inputs or unobservable inputs). To the extent that the Company’s initial accounting for a business combination is incomplete at the end of a reporting period, provisional amounts are reported for those items which are incomplete. Equity Method Investment in the Joint Venture Prior to the Merger, the Company accounted for its investment in the Joint Venture using the equity method. During that period, the Company evaluated its equity method investment for impairment whenever an event or change in circumstances occurred that had a potentially significant adverse impact on the carrying value of the investment. During the period from the inception of the Joint Venture through the date of the Merger, the Company did not identify any loss in the value of its investment that it deemed other than temporary, and therefore did not recognize any loss from impairment. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. The Company’s cash and cash equivalents are deposited with several financial institutions. Deposits may exceed the amounts insured by the Federal Deposit Insurance Corporation in the U.S. and similar deposit insurance programs in other jurisdictions. The Company mitigates the risk of our short-term investment portfolio by depositing funds with reputable financial institutions and monitoring risk profiles. The Company’s cash balances from time to time include funds it manages for customers, the most significant of which relates to funds remitted to retail pharmacies. Such funds are not restricted; however, these funds are generally paid out in satisfaction of the processing obligations pursuant to the management contracts. At the time of receipt, the Company records a corresponding liability within accrued expenses on the accompanying consolidated balance sheets. Such liabilities are summarized as “Pass-through payments” within Note 11, Accrued Expenses . Allowance for Doubtful Accounts The allowance for doubtful accounts was $22,360 at March 31, 2020 and $0 at March 31, 2019 and all prior balance sheet dates. The allowance for doubtful accounts reflects the Company’s best estimate of losses inherent in the Company’s receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available evidence. The following table summarizes activity related to the allowance for doubtful accounts: Year Ended Year Ended March 31, March 31, 2020 2019 Balance at beginning of period $ — $ — Acquisition in Merger 22,059 — Provisions 905 — Write-offs (604) — Balance at end of period $ 22,360 $ — Capitalized Software Developed for Internal Use The Company provides services to many of its customers using software developed for internal use. The costs that are incurred to develop such software are expensed as incurred during the preliminary project stage and classified within research and development in the consolidated statements of operations. Once certain criteria have been met, direct costs incurred in developing or obtaining computer software are capitalized. Training and maintenance costs are expensed as incurred. Capitalized software costs are included in other noncurrent assets, net on the consolidated balance sheets and are generally amortized over the estimated useful life of three years . Capitalized Software Developed for Sale Development costs for software developed for sale to external customers are capitalized once a project has reached the point of technological feasibility. Completed projects are amortized after reaching the point of general availability using the straight-line method based on an estimated useful life of approximately three years . At each balance sheet date, or earlier if an indicator of an impairment exists, the Company evaluates the recoverability of unamortized capitalized software costs based on estimated future undiscounted revenues net of estimated related costs over the remaining amortization period. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. Depreciation, including that related to assets under capital lease, is computed using the straight-line method over the estimated useful lives of the related assets. Expenditures for maintenance, repair and renewals of minor items are expensed as incurred. Expenditures for repair and renewals that extend the useful life of an asset are capitalized. Goodwill and Intangible Assets Goodwill and intangible assets resulting from the Company’s acquisitions are accounted for using the acquisition method of accounting. Intangible assets with definite lives are amortized over their useful lives either on a straight-line basis or using an accelerated method, depending on the pattern that the Company expects the economic benefits of the assets to be consumed. Useful lives of the related assets generally are as follows: Customer relationships 12 - 16 years Tradenames 18 years Technology-based intangible assets 6 - 12 years The Company assesses its goodwill for impairment annually (as of January 1 of each year) or whenever significant indicators of impairment are present. The Company first assesses whether it can reach a more likely than not conclusion that goodwill is not impaired via qualitative analysis alone. To the extent such a conclusion cannot be reached based on a qualitative assessment alone, the Company, using the assistance of a valuation specialist as appropriate, compares the fair value of each reporting unit to its associated carrying value. The Company will generally recognize an impairment charge for the amount, if any, by which the carrying amount of the reporting unit exceeds its fair value. Long-Lived Assets Long-lived assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and fair value. Long-lived assets held for sale are reported at the lower of cost or fair value less costs to sell. Derivatives Derivative financial instruments are used to manage the Company’s interest rate exposure. The Company does not enter into financial instruments for speculative purposes. Derivative financial instruments are accounted for and measured at fair value. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings (for example, in “interest expense” when the hedged transactions are interest cash flows associated with floating-rate debt). Receipts and payments under the derivative instruments are classified within cash flows from financing activities on the accompanying statements of cash flows. Tangible Equity Units In connection with the initial public offering, the Company completed an offering of TEUs. Each TEU comprises an amortizing note and purchase contract, both of which are freestanding instruments and separate units of account. The amortizing notes were issued at par and are classified as debt on the accompanying condensed consolidated balance sheet, with scheduled principal payments over the next twelve months reflected in current maturities of long-term debt. The purchase contracts are accounted for as prepaid forward contracts and classified as equity. The TEU proceeds and issuance costs were allocated to the amortizing notes and purchase contracts on a relative fair value basis. See Note 13, Tangible Equity Units for further discussion. Other Investments The proceeds of the offering of TEUs were used to acquire TEUs of the Joint Venture that substantially mirror the terms of the TEUs included in the offering. Under these mirrored arrangements, the Joint Venture is required to make cash payments or to transfer LLC Units to the Company concurrent with any cash payments or issuance of shares by the Company pursuant to the terms of its TEUs. Prior to the Merger, the Company accounted for these mirror arrangements as investments in debt and equity securities. The Company’s investment in debt securities were classified as “available-for-sale” and its investment in forward purchase contracts were considered equity securities measured at fair value. Changes in unrealized gains and losses for the Company’s debt securities were recognized as adjustments to other comprehensive income (loss) while changes in unrealized gains and losses for the Company’s investment in forward purchase contracts are recognized as adjustments to pretax income (loss). After the Merger, the Company’s investment in the TEUs of the Joint Venture is eliminated in the consolidated financial statements. See Note 22, Related Party Transactions , for a discussion regarding the Investment in business purchase option. Equity Compensation The Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award and recognizes the expense over the requisite service period, typically on a straight-line basis. The Company recognizes stock-based compensation cost for awards with performance conditions if and when it concludes that it is probable that the performance conditions will be achieved. The fair value of equity awards is recognized as an asset or expense in the same period and in the same manner as if the Company had paid cash for the goods or services. The Company recognizes forfeitures as they occur. Prior to the Merger, these equity awards, as well as awards granted under the Company’s previous equity incentive plan, were granted to employees of the Company’s equity method investee, and therefore were subject to the accounting framework for awards granted to non-employees. Under this framework, the Company measured the compensation expense for equity awards based on the estimated fair value of such awards at the grant date, in a manner consistent with the recognition of expense for awards to employees. The recognized pre-Merger equity-based compensation is classified within loss from equity method investment in the Joint Venture on the consolidated statement of operations. However, as a result of a requirement that the Joint Venture issue an additional LLC Unit to the Company upon the exercise of each Company equity award (as described in Note 22, Related Party Transactions ), the Company recognized an offsetting amount (i.e., a deemed dividend) within the same caption on the consolidated statements of operations. Prior to the Merger, the Company recognized this deemed dividend as a receivable equal to the cumulative amount of stock compensation expense recognized by the Joint Venture for any outstanding equity awards. The dividend receivable was relieved upon exercise of the respective underlying equity awards. The Company’s dividend receivable from the Joint Venture was settled upon completion of the Merger. Revenue The Company recognizes revenue at an amount that reflects the consideration it expects to be entitled to in exchange for transferring goods or services to a customer, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). See Note 4, Revenue Recognition , for additional information. Income Taxes The Company records deferred income taxes for the tax effect of differences between book and tax bases of its assets and liabilities, as well as differences relating to the timing of recognition of income and expenses. Deferred income taxes reflect the available net operating losses and the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of the future tax benefits related to deferred tax assets is dependent on many factors, including the Company’s past earnings history, expected future earnings, the character and jurisdiction of such earnings, reversing taxable temporary differences, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of its deferred tax assets, carryback and carryforward periods and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The Company recognizes tax benefits for uncertain tax positions at the time the Company concludes that the tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. The benefit, if any, is measured as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement. Tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period that they meet the more likely than not standard, upon resolution through negotiation or litigation with the taxing authority or on expiration of the statute of limitations. Warranties In the normal course of business, the Company provides warranties regarding the performance of software and products it sells. The Company’s liability under these warranties is to bring the product into compliance with previously agreed upon specifications. For software products, this may result in additional project costs, which are reflected in our estimates used for the percentage of completion method of accounting for software installations services within these contracts. In addition, most of the Company’s customers who purchase software and automation products also purchase annual maintenance agreements. Revenues from these maintenance agreements are recognized on a straight-line basis over the contract period and the cost of servicing product warranties is charged to expense when claims become estimable. As of March 31, 2020 and 2019, accrued warranty costs were immaterial. Classification of Distributions Received from the Joint Venture Prior to the Merger, the Company classifies distributions received from the Joint Venture in its consolidated statement of cash flows according to the nature of the distribution. Accounting Pronouncements Not Yet Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, as amended by ASU No. 2018-19, which requires that a financial asset (or group of financial assets) measured at amortized cost be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. This update is scheduled to be effective for the Company beginning April 1, 2020. The Company is currently assessing the potential effects this update may have on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, which modifies the disclosure requirements for fair value measurements. ASU 2018-13 is effective for the Company beginning April 1, 2020. Early adoption is permitted for either the entire standard or only the provisions that eliminate or modify requirements. The Company is currently assessing the potential effects this update may have on its financial statement disclosures. In February 2016, the FASB issued ASU No. 2016-02, which generally requires that all lease obligations be recognized on the balance sheet at the present value of the remaining lease payments with a corresponding right of use asset (“ROU asset)”. As originally issued, the standard required that companies adopt the standard using the modified retrospective transition method and report a cumulative effect adjustment to the opening balance of retained earnings in the earliest comparative period presented. In July 2018, the FASB issued ASU No. 2018-11 which provides companies with the option to apply this cumulative effect adjustment to the opening balance of retained earnings in the period of adoption instead of the earliest comparative period presented. This update is effective for the Company beginning April 1, 2020, with early adoption permitted. The Company will utilize the modified retrospective approach upon adoption. While the Company is finalizing the assessment on the effect of adoption, the most significant impact is expected to relate to the recognition of new ROU assets and lease liabilities on the Company’s consolidated balance sheet for operating leases, as well as additional disclosures. Consequently, with adoption, the Company expects to recognize additional ROU assets and corresponding operating lease liabilities of between $110,000 and $125,000 . In August 2018, the FASB issued ASU No. 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This update also requires that the effects of such capitalized costs be classified in the same respective caption of the statement of operations, balance sheet and cash flows as the underlying hosting arrangement. Upon adoption, a company may elect to either retrospectively restate each prior reporting period or apply the update prospectively to all implementation costs incurred after the effective date. This update is scheduled to be effective for the Company beginning April 1, 2020. The Company will adopt the new guidance prospectively and is assessing the potential effects this update may have on its consolidated financial statements. The Company does not believe that any other recently issued, but not yet effective accounting standards, if adopted, would have a material impact on the consolidated financial statements. Recently Adopted Accounting Pronouncements In April 2019, the Company adopted ASU No. 2018-16, which adds the Overnight Index Swap rate based on the Secured Overnight Financing Rate as a benchmark interest rate for hedging purposes. As the adoption of this update applies only to qualifying new or redesignated hedging relationships entered into following the date of adoption, its adoption had no immediate effect on the consolidated financial statements. In April 2019, the Company adopted ASU No. 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“Tax Legislation”). The adoption of this update was not material and is limited to the separate disclosure in Note 26, Accumulated Other Comprehensive Income related to the reclassification of such stranded costs from accumulated comprehensive income (loss) to accumulated deficit. In April 2019, the Company adopted ASU No. 2018-07, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Among other provisions, the measurement date for awards to nonemployees changed from the earlier of the date at which a commitment for performance by the counterparty is reached or the date at which performance is complete under the previous guidance to the grant date under this update. Because the Company’s equity-based compensation was previously subject to remeasurement at fair value each quarter under the previous authoritative literature, the effect of the adoption of this update had no material effect on the consolidated financial statements. In April 2019, the Company and the Joint Venture adopted ASC 606 on a modified retrospective basis. ASC 606 replaced most prior general and industry specific revenue recognition guidance with a principles-based comprehensive revenue recognition framework. Under this revised framework, a company recognizes revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Prior to the Merger, the Company’s operations consisted principally of an investment in the Joint Venture, its financial statements reflected no revenue and, accordingly, the Company recognized no direct impact on its financial statements from the adoption of this update. However, upon adoption, the Joint Venture recognized a cumulative effect adjustment to its Members’ deficit. As a result of the impact of the adoption of ASC 606 to the Joint Venture’s Members’ deficit, the Company was required to recognize a proportionate amount of this cumulative effect adjustment to its April 1, 2019 retained earnings as well. The effect is disclosed within a separate caption of the accompanying consolidated statement of stockholders’ equity. The adoption of the new standard had an immaterial impact on the Company’s consolidated statement of cash flows for the fiscal year ended March 31, 2020. See Note 4, Revenue Recognition for more information. |