Revenue Recognition Revenue from Contract with Customer (Notes)

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Beginning January 1, 2018, our results are presented in accordance with the guidance of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), or Topic 606. We measure revenue based upon consideration specified by contracts with our customers. Revenue is recognized when our performance obligation under the contract is satisfied by transferring control over the product or service to the customer. We derive our revenues for our Consumer and Business segments primarily from the sale of our communication services and customer equipment as further described in Note 3, Revenue Recognition. The majority of the Company's contracts with customers have a single performance obligation for service revenues. We recognize revenue with customers when control transfers, which occurs upon delivery of a service or product. For our Business segment, the typical life of a customer for service is 7 years.

Revenue Recognition

On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Our results for reporting periods beginning after January 1, 2018 are presented in accordance with the provisions under Topic 606 but any prior period amounts have not been adjusted and continue to be reported in accordance with our revenue recognition policy.

Service Revenues

Substantially all of our revenues are service revenues, which are derived from monthly subscription fees under usage based or pay-per-use type billing arrangements, and contract-based services plans. For consumer customers in the United States, we offer domestic and international rate plans, including a variety of residential plans and mobile plans. For business customers, we offer small and medium business, mid-market, and enterprise customers several service plans with different pricing structures and contractual requirements ranging in duration from month-to-month to three years. In addition, we provide managed equipment to business customers for a monthly fee. Customers also have the opportunity to purchase premium features for additional fees. We also derive service revenues from per minute fees for international calls if not covered under a plan, including calls made via applications for mobile devices and other stand-alone products, and for any calling minutes in excess of a customer's monthly plan limits. For a portion of our customers, monthly subscription fees are automatically charged to customers' credit cards, debit cards or ECP in advance and are recognized over the following month as service is provided.

Service revenue also includes supplying messaging (SMS and Voice) services to customers as part of our CPaaS offerings. Revenue is recognized in the period when messages are sent by the customer. We also transact with providers or bulk SMS aggregators and sell services to these customers who then onsell to their customers. Since the aggregator is our customer, revenue is recognized on a gross basis with related costs included in cost of revenues.

In the United States, we charge regulatory, compliance and intellectual property, and E-911 recovery fees on a monthly basis to defray costs and to cover taxes that we are charged by the suppliers of telecommunications services. These charges, along with the remittance to the relevant government entity, are recorded on a gross basis. In addition, we charge customers USF fees from customers to recover our obligation to contribute to the fund, as allowed by the FCC. We recognize USF revenue on a gross basis and record the related fees in cost of revenues.

Customer Equipment and Shipping Revenues

Revenues are generated from sales of customer equipment directly to customers for replacement devices, or for upgrading their device at the time of customer sign-up for which we charge an additional fee. In addition, customer equipment and shipping revenues include revenues from the sale of VoIP telephones in order to access our small and medium business services. Customer equipment and shipping revenues also include the fees that customers are charged for shipping their customer equipment to them.

Disaggregation of Revenue

The following tables detail our revenue from customers disaggregated by primary geographical market, source of revenue, and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue for our Business and Consumer segments.



	For the years ended December 31,						For the years ended December 31,
	2019						2018
	Business		Consumer		Total		Business		Consumer		Total
Primary geographical markets
United States	$	500,545	$	354,710	$	855,255	$	421,239	$	404,482	$	825,721
Canada	6,942		19,754		26,696		3,549		23,718		27,267
United Kingdom	55,721		11,002		66,723		36,992		12,438		49,430
Other Countries	240,672		—		240,672		146,364		—		146,364
	803,880		385,466		1,189,346		608,144		440,638		1,048,782
Major Sources of Revenue
Service revenues	$	719,514	$	340,462	$	1,059,976	$	526,707	$	394,389	$	921,096
Access and product revenues	46,232		264		46,496		50,068		559		50,627
USF revenues	38,134		44,740		82,874		31,369		45,690		77,059
	803,880		385,466		1,189,346		608,144		440,638		1,048,782

In addition, the Company recognizes service revenues from its customers through subscription services provided or through usage or pay-per-use type arrangements. During the year ended December 31, 2019, the Company recognized $637,980 related to subscription services, $338,697 related to usage, and $212,669 related to other revenues such as USF, other regulatory fees, and credits. During the year ended December 31, 2018, the Company recognized $607,823 related to subscription services, $247,256 related to usage, and $193,703 related to other revenues such as USF, other regulatory fees, and credits.

Contract Assets and Liabilities

The following table provides information about receivables and contract liabilities from contracts with customers:

⁽¹⁾ Amounts included in accounts receivables on our consolidated balance sheet.

⁽²⁾ Amounts included in deferred revenues on our consolidated balance sheet.

Our deferred revenue represents the advance consideration received from customers for subscription services and is predominantly recognized over the following month as transfer of control occurs. During the year ended December 31, 2019 and 2018, the Company recognized revenue of $456,855 and $445,547, respectively, related to its contract liabilities. We expect to recognize $59,464 into revenue over the next twelve months related to our deferred revenue as of December 31, 2019.

Remaining Performance Obligation

Transaction price allocated to the remaining performance obligation represents contracted revenue that has not yet been recognized. The typical subscription term may range from 1 month to 3 years. Contracted revenue as of December 31, 2019 that has not yet been recognized was approximately $0.4 billion. This excludes contracts with an original expected length of less than one year. The Company expects to recognize the majority of its remaining performance obligation over the next 18 months.

Contract Acquisition Costs

We have various commission programs for internal sales personnel and channel partners that are incremental to the acquisition of customer contracts. These costs are recorded as deferred contract acquisition costs on the consolidated balance sheets which eligible employees and third parties may earn commission on sales of services and products to customers. We expect that these commission fees are recoverable and, therefore, we have capitalized $68,982 and $49,636 as contract costs, net of accumulated amortization, as of December 31, 2019 and December 31, 2018, respectively, included within deferred customer acquisitions costs, current portion and deferred customer acquisition costs on our consolidated balance sheet. In addition, we established a deferred tax liability associated with the transition asset of $9,636 upon the adoption of Topic 606 on January 1,2018. Capitalized commission fees are amortized to sales and marketing expense over the estimated customer life, which is seven years for Business customers. During the year ended December 31, 2019 and 2018, the amounts amortized to sales and marketing were $11,359 and $10,287, respectively. There were no impairment losses recognized in relation to the costs capitalized for the years ended December 31, 2019 and December 31, 2018. In addition, the Company expenses sales commissions for commission plans related to customer arrangements deemed less than a year and for residuals and renewals.

December 31, 2019

December 31, 2018

Receivables⁽¹⁾

Contract liabilities ⁽²⁾