On September 6, 2024, the Company completed the sale of its Physical Security Business to Buyer, and Buyer assumed certain of the Company’s liabilities related to the Physical Security Business (collectively, the “Asset Sale”) pursuant to that certain Stock and Asset Purchase Agreement, dated as of April 2, 2024 (the “Purchase Agreement”), by and between the Company and Buyer. As consideration for the Asset Sale, the Company received approximately $144.3 million in cash, subject to further customary adjustments as set forth in the Purchase Agreement.

In connection with the closing of the Asset Sale, the Company and Buyer entered into a transition services agreement (the “Transition Services Agreement”). The Transition Services Agreement outlines the information technology, people, and facility support the Company will provide to Buyer for a period of 12 months to 18 months after the transaction closing date. The agreed upon charges for such services are intended to allow the Company and Buyer, respectively, to recover all costs and expenses of providing such services. Fees earned and incurred under the Transition Services Agreement for the three months ended September 30, 2024 were immaterial.

The following summarizes the components of the gain on sale of the Physical Security Business, net of taxes (in thousands):


Cash proceeds	$	144,262
Assets sold:
Cash		868
Accounts receivable		11,610
Inventories		15,969
Prepaid expenses and other current assets		1,640
Property and equipment		861
Other assets		2,963
Total assets sold		33,911
Liabilities divested:
Accounts payable		4,179
Deferred revenue		3,579
Other accrued expenses and liabilities		718
Other liabilities		2,482
Total liabilities divested		10,958
Other:
Goodwill written off related to sale of Physical Security Business		(10,196	)
Intangible assets written off related to sale of Physical Security Business		(3,595	)
Transaction and other costs		(676	)
Total other		(14,467	)
Income tax provision		7,296
Gain on sale of Physical Security Business, net of taxes	$	99,546

The gain on sale of the Physical Security Business is subject to adjustment as the Company completes its tax analysis on the ability to utilize net operating loss and credit carryforwards to reduce the amount of income tax provision. Any adjustment to the income tax provision recorded in connection with the Sale of the Physical Security Business will be completed by December 31, 2024.

As the sale of the Company's Physical Security Business represented a significant strategic shift that has a material effect on the Company's operations and financial results, the Company has separately reported the results of its Physical Security Business as discontinued operations in the condensed consolidated statements of comprehensive income (loss) for all periods presented.

The following presents the financial results of discontinued operations (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net revenue	$	9,045		$	20,114		$	42,473		$	55,301
Cost of revenue		5,210			9,492			22,825			27,470
Gross profit		3,835			10,622			19,648			27,831
Operating expenses:
Research and development		2,311			1,897			6,514			5,488
Selling and marketing		3,620			4,237			11,960			13,092
General and administrative		2,240			724			3,741			2,213
Restructuring and severance		—			104			145			330
Total operating expenses		8,171			6,962			22,360			21,123
Income (loss) from operations		(4,336	)		3,660			(2,712	)		6,708
Non-operating income (expense):
Foreign currency gains (losses), net		20			(15	)		(25	)		3
Income (loss) before income tax benefit (provision)		(4,316	)		3,645			(2,737	)		6,711
Income tax benefit (provision)		48			(7	)		—			(46	)
Net income (loss)	$	(4,268	)	$	3,638		$	(2,737	)	$	6,665

The cash flows related to the discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows. The following presents the significant non-cash items and capital expenditures related to discontinued operations (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Depreciation and amortization	$	226	$	366	$	892	$	1,045
Capital expenditures		192		206		322		646
Stock-based compensation		4,264		475		5,254		1,468

The carrying value of the assets and liabilities of the discontinued operations on the condensed consolidated balance sheet as of September 30, 2024 and December 31, 2023 were as follows (in thousands):


	September 30, 2024		December 31, 2023
ASSETS
Accounts receivable, net	$	—	$	14,565
Inventories		—		15,152
Prepaid expenses and other current assets		—		3,199
Total current assets held-for-sale	$	—	$	32,916

Property and equipment, net	$	—	$	848
Operating lease right-of-use assets		—		2,925
Intangible assets, net		—		4,251
Goodwill		—		10,218
Other assets		—		556
Total long-term assets held-for-sale	$	—	$	18,798

LIABILITIES
Accounts payable	$	—	$	7,598
Operating lease liabilities		—		932
Deferred revenue		—		2,341
Accrued compensation and related benefits		—		958
Other accrued expenses and liabilities		—		1,173
Total current liabilities held-for-sale	$	—	$	13,002

Long-term operating lease liabilities	$	—	$	2,209
Long-term deferred revenue		—		927
Total long-term liabilities held-for-sale	$	—	$	3,136

The Physical Security Business recognized revenue upon transfer of control of promised products or services to customers in an amount that reflected the consideration expected to be received in exchange for those products or services. The contracts entered into could have included various combinations of its products, software licenses, and services, which were generally capable of being distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, the transaction price was allocated to each performance obligation, generally on a relative basis using its standalone selling price. The stated contract value was generally the transaction price to be allocated to the separate performance obligations. Revenue was recognized net of any taxes collected from customers that were subsequently remitted to governmental authorities.

Revenues are derived from sales of hardware products, software licenses, subscriptions, professional services, software maintenance and support, and extended hardware warranties.