Revenue Recognition

3 Months Ended

Mar. 31, 2018

Revenue from Contract with Customer [Abstract]

We account for revenue in accordance with Topic 606, which was adopted January 1, 2018. For additional information about the adoption impact, please see Note 3.

We recognize revenue on identity theft protection services, as well as insurance services and other monthly membership and transaction services. The following is a description of principal activities, separated by reportable segments, from which we generate revenues. For additional information about reportable segments, please see Note 20.

Accounting Policy, Nature of Services and Timing of Satisfaction of Performance Obligations

Personal Information Services segment

We offer identity theft and privacy protection services to subscribers through multiple marketing channels including, but not limited to, direct-to-consumer, affiliates and partners, and as an embedded service for either its employees or consumers. We also offer breach-response services to large and small organizations by providing affected individuals with identity theft recovery and credit monitoring services.

With the exception of breach-response services, revenue is measured based on the stated consideration specified in the monthly renewable individual subscription contract. Subscription fees billed by our clients are generally billed directly to the subscriber’s credit card, mortgage bill or demand deposit accounts. Subscription fees billed by us are generally billed directly to the subscriber’s credit card except for arrangements under which subscription fees are paid to us by our clients on behalf of the subscriber. These payment mechanisms significantly reduce the risk of uncertain cash flows and a significant portion of our subscribers are billed in advance of fulfillment, which also mitigates uncertainty of cash flows. The prices to subscribers of various configurations of our non-breach services range generally from $4.99 to $25.00 per month. As a means of allowing customers to become familiar with our services, our subscriptions periodically may be offered with trial, delayed billing or guaranteed refund periods. No revenues are recognized until applicable trial periods are completed. We are the principal in almost all of our transactions and therefore, revenue is recorded on a gross basis in the amount that we bill subscribers from the sale of subscriptions and is recognized ratably on a straight-line basis over the contractual term of the service agreement, ranging from one month to one year. In a minority of transactions, we also provide services to certain legacy partners in which we are the agent in the transactions and therefore, we record revenue on a net basis in the amount that we bill certain partners. Revenue from these arrangements is also recognized ratably on a straight-line basis over the contractual term of the service agreement. Based on the short-term nature of our monthly subscription services and the service terms, we do not have any unsatisfied, or partially unsatisfied, future performance obligations, in addition to the amounts included in contract liabilities. In addition, and for the same reasons noted above, we do not have any contracts that have a significant financing component. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities.

Revenue for annual subscription fees and breach-response services, which the contract term is one year or greater, are deferred and recognized ratably on a straight-line basis over the contractual term of the service agreement, which is as the services are systematically transferred to the subscriber.

Our monthly contractual subscription terms do not have stated refund provisions, however, we considered our refund history as variable consideration in determining the estimated transaction price. Discretionary refunds for our monthly subscriptions are generally consistent, processed within the service term and are appropriately reflected as reductions to revenue. Discretionary refunds in excess of one month of service are insignificant. Annual subscriptions include subscribers with pro-rata refund provisions. Revenue related to annual subscribers with pro-rata provisions is recognized based on a pro-rata share of revenue earned. An allowance for discretionary subscription refunds is established based on our historical experience. For subscriptions with refund provisions whereby only the prorated subscription fee is refunded upon cancellation by the subscriber, deferred subscription fees are recorded when billed and amortized as subscription fee revenue on a straight-line basis over the subscription period, generally one year.

We also generate revenue through a collaborative arrangement, which involves joint marketing and servicing activities. We recognize our share of revenues and expenses from this arrangement in our condensed consolidated financial statements and account for third-party revenue and contract costs in accordance with U.S. GAAP.

Insurance and Other Consumer Services Segment

We offer insurance and other membership services to subscribers on a monthly basis. We are not planning to develop new business in this segment and are experiencing normal attrition due to ceased marketing and retention efforts. We provide these insurance services to certain legacy partners in which we are the agent in the transactions and therefore, we record revenue on a net basis in the amount that we bill certain partners. Revenue from these arrangements is also recognized ratably on a straight-line basis over the contractual term of the service agreements. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities.

Disaggregation of Revenue

The following table disaggregates our revenue by major source for the three months ended March 31, 2018 (in thousands):


	Personal Information Services		Insurance and Other Consumer Services		Total
Primary geographical markets:
United States	$	34,342	$	1,505	$	35,847
Canada	3,231		—		3,231
Total revenue	$	37,573	$	1,505	$	39,078
Major service lines:
Identity Guard® Services	$	13,514	$	—	$	13,514
Canadian business	3,231		—		3,231
U.S. financial institutions	19,559		—		19,559
Breach services & other	1,269		1,505		2,774
Total revenue	$	37,573	$	1,505	$	39,078
Timing of revenue recognition:
Products and services transferred over time	$	37,573	$	1,505	$	39,078
Products transferred at a point in time	—		—		—
Total revenue	$	37,573	$	1,505	$	39,078

Contract Balances

The opening and closing balances of our accounts receivable, contract assets and contract liabilities are as follows (in thousands):


	Accounts Receivable		Contract Assets		Contract Liabilities, Current		Contract Liabilities, Non-Current
Opening Balance as of December 31, 2017	$	8,225	$	—	$	7,759	$	—
Increase (decrease), net	(2,219)		353		(2,452)		50
Ending Balance as of March 31, 2018	$	6,006	$	353	$	5,307	$	50

We had $5.0 million deferred revenue as of December 31, 2017 that was recognized in the three months ended March 31, 2018.