XML 44 R29.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

Significant estimates and judgments relied upon by management in preparing these consolidated financial statements include revenue recognition, reserves for excess and obsolete inventory, valuation of inventory and deferred inventory costs, the expensing and capitalization of software-related research and development costs, amortization and depreciation periods, the recoverability of net deferred tax assets, valuations of uncertain tax positions, warranty allowances, the valuation of equity instruments and stock-based compensation expense.

Although the Company regularly reassesses the assumptions underlying these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances existing at the time such estimates are made.

The COVID-19 pandemic disrupted the Company’s global supply chain. Throughout 2022 and 2021, the Company experienced shipping bottlenecks and shortages of supply that resulted in its inability to fulfill certain customer orders within normal lead times. This adversely impacted the Company’s revenue and operating results for the years ended December 31, 2022 and 2021. The Company also experienced, in some cases, significant increases in shipping costs. While the Company continues to work with its supply chain, contract manufacturers, logistics partners and customers to minimize the extent of such impacts, the Company expects the effects of global supply chain issues to continue and cannot predict if or when such effects will subside. This may prevent the Company from being able to fulfill our customers’ orders in a timely manner or at all, which could lead to one or more of our customers canceling their orders. At this time, the Company is neither able to estimate the extent of these impacts nor predict whether its efforts to minimize or contain them will be successful.

In addition to the negative impact on the Company’s business from global supply chain challenges related to COVID-19, the Company derived certain benefits that included decreases in certain operating expenses, such as travel and trade show expense, and benefited from certain U.S. government tax relief measures. These benefits began to gradually diminish throughout 2022 and may continue to do so as the various geographies in which the Company operates continue to recover from the pandemic.

In addition, the regions in which the Company operates have experienced a significant increase in inflation, which has adversely impacted the cost to manufacture the Company's products with limited ability to pass such increases on to its customers under previously established fixed price agreements. Inflation has further resulted in increased operating costs, and interest rate increases, which will result in increased debt service costs. If interest rates continue to rise the Company anticipates further adverse effects from inflation and increased interest rates.

At this time the Company is neither able to estimate the extent of these impacts nor predict whether its efforts to minimize or contain them will be successful. The Company intends to continue to monitor its business very closely for any effects of COVID-19, inflation and rising interest rates for as long as necessary.

Subsequent Event Considerations

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required. The Company has evaluated all subsequent events and, other than those disclosed in Note 20, Subsequent Events, has determined that there are no other material recognized or unrecognized subsequent events requiring disclosure in these consolidated financial statements.

Cash and Cash Equivalents, Restricted Cash

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all highly liquid investments maturing within three months from the date of purchase. As of December 31, 2022 and 2021, the Company’s cash and cash equivalents consisted of investments in money market mutual funds.

Restricted cash as of December 31, 2022 and 2021 consisted of a certificate of deposit of $1,013 and $1,001, respectively, pledged as collateral for a stand-by letter of credit required to support a contractual obligation. Restricted cash as of December 31, 2022 and 2021 also included cash of $2,100 pledged as collateral in connection with six and two letters of credit, respectively, to support contractual obligations, as further discussed in Note 17, Leases.

The following table is a reconciliation of cash, cash equivalents and restricted cash included in the accompanying consolidated balance sheets that sum to the total cash, cash equivalents and restricted cash included in the accompanying consolidated statements of cash flows.


	December 31, 2022		December 31, 2021
Cash and cash equivalents	$	126,312	$	154,703
Restricted cash included in other assets		3,113		3,101
	$	129,425	$	157,804

Accounts Receivable

Accounts receivable are presented net of a provision for doubtful accounts, which is an estimate of amounts that may not be collectible. Accounts receivable for customer contracts with customary payment terms, which are one year or less, are recorded at invoiced amounts and do not bear interest. The Company may, in limited circumstances, grant payment terms longer than one year. Payments due beyond 12 months from the balance sheet date are recorded as non-current assets. The Company generally does not require collateral, but the Company may, in certain instances based on its credit assessment, require full or partial prepayment prior to shipment.

Accounts receivable as of December 31, 2022 and 2021 consisted of the following:


	December 31,
	2022		2021
Current portion of accounts receivable, net:
Accounts receivable, net	$	74,407	$	85,689
Accounts receivable, extended payment terms		77		85
		74,484		85,774
Accounts receivable, net of current portion:
Accounts receivable, extended payment terms		—		115
	$	74,484	$	85,889

The Company performs ongoing credit evaluations of its customers and, if necessary, provides a provision for doubtful accounts and expected losses. When assessing and recording its provision for doubtful accounts, the Company evaluates the age of its accounts receivable, current economic trends, creditworthiness of the customer, customer payment history, and other specific customer and transaction information. The Company also provides an overall expected credit loss amount, based on historical loss rates, in accordance with ASC 326 Credit Losses. The Company writes off accounts receivable against the provision when it determines a balance is uncollectible and no longer actively pursues collection of the receivable. Adjustments to the provision for doubtful accounts are recorded as selling, general and administrative expenses in the consolidated statements of operations and comprehensive (loss) income. A summary of changes in the provision for doubtful accounts for the years ended December 31, 2022, 2021 and 2020 is as follows:


	Year Ended December 31,
	2022		2021		2020
Provision for doubtful accounts at beginning of year	$	117	$	58	$	20
Provisions and recoveries		519		59		38
Write-offs		—		—		—
Provision for doubtful accounts at end of year	$	636	$	117	$	58

As of December 31, 2022, the Company concluded that a portion of amounts due under extended payment terms was more likely than not uncollectible and a reserve of $186 was recorded. As of December 31, 2021, the Company concluded that all amounts due under extended payment terms were collectible and no reserve for credit losses was recorded. During the years ended December 31, 2022, 2021 and 2020, the Company did not write off uncollectible receivables due under extended payment terms.

Inventories

The Company values inventories at the lower of cost or net realizable value. The Company computes cost using the first-in first-out convention. Inventories are composed of hardware and related component parts of finished goods. The Company establishes provisions for excess and obsolete inventories after evaluating historical sales, future demand, market conditions, expected product life cycles, and current inventory levels to reduce such inventories to their estimated net realizable value. The Company makes such provisions in the normal course of business and charges them to cost of revenue in its consolidated statements of operations and comprehensive (loss) income.

The Company includes deferred inventory costs within inventory in its consolidated balance sheets. Deferred inventory costs represent the cost of products that have been delivered to the customer for which revenue associated with the arrangement has been deferred as a result of not meeting all of the required revenue recognition criteria, such as receipt of customer acceptance. The Company recognizes deferred inventory costs as cost of revenue in its consolidated statements of operations and comprehensive (loss) income when the related revenue is recognized.

Property and Equipment

The Company states property and equipment at historical cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets. The Company records leasehold improvements at cost with any reimbursement from the landlord being accounted for as deferred rent, which is amortized using the straight-line method over the lease term. The Company also includes costs for trial systems held and used by its customers pursuant to evaluation agreements within property and equipment. The Company depreciates trial systems held and used by its customers over the estimated useful life of such assets, which is two years.

Whenever a trial system is sold to a customer and the selling price is recorded as revenue, the Company removes the related net book value of the trial system sold from property and equipment and records it as a cost of revenue. The Company expenses maintenance and repairs expenditures as incurred.

Estimated useful lives of the respective property and equipment assets are as follows:


		Estimated Useful Life
Computers and purchased software		3 – 4 years
Leasehold improvements		Shorter of lease term or 7 years
Furniture and fixtures		6 – 8 years
Machinery and equipment		3 – 10 years
Building		40 years
Building improvements		5 – 40 years
Trial systems at customers’ sites		2 years

Upon retirement or sale, the Company removes the cost of assets disposed of and the related accumulated depreciation from the accounts and any resulting gain or loss is included in (loss) income from operations.

Long-Lived Assets

Long-lived assets consist of property and equipment, right-of-use assets and intangible assets. The Company amortizes its acquired intangible assets subject to amortization using the straight-line method over their estimated useful lives, ranging from three to ten years. Purchased software licenses are classified as intangible assets and are amortized using the straight-line method over their estimated useful lives, typically ranging from three to four years.

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative

industry or economic trends and significant changes or planned changes in the use of the assets. The Company measures recoverability of assets to be held and used by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the Company measures the impairment to be recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset, less the cost to sell. The Company evaluates the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

The Company considered potential impairment indicators of all long-lived assets. As of December 31, 2022 the Company identified one potential impairment indicator due to the loss of a certain Tier 1 customer related to the customer relationships intangible asset class, which caused a significant underperformance of the business in relation to expectations. This triggered management to perform a quantitative analysis, the result of which did not indicate an impairment. There were no other indicators of impairment as of December 31, 2022 and 2021.

Goodwill

Goodwill represents the excess purchase price over the estimated fair value of net assets acquired through acquisitions. The Company tests goodwill for impairment on an annual basis and between annual tests when impairment indicators are identified, and goodwill is written down when impaired.

The Company performs its annual goodwill impairment test during its fourth quarter. For its annual goodwill impairment test, the Company operates under one reporting unit and the fair value of its reporting unit has been determined based on the Company’s enterprise value. As part of the annual goodwill impairment test, the Company has the option to perform a qualitative assessment to determine whether further impairment testing is necessary. Examples of events and circumstances that might indicate that the reporting unit’s fair value is less than its carrying amount include macro-economic conditions such as deterioration in the entity’s operating environment or industry or market considerations; entity-specific events such as increasing costs, declining financial performance, or loss of key personnel; or other events such as a sustained decrease in the stock price on either an absolute basis or relative to peers. If, as a result of its qualitative assessment, it is more likely than not (i.e., greater than 50% chance) that the fair value of the Company’s reporting unit is less than its carrying amount, the quantitative impairment test will be required. Otherwise, no further testing will be required. The Company completed its qualitative assessment, including consideration of the factors that contributed to the Company's financial performance for the year ended December 31, 2022, and concluded that as of December 31, 2022 and 2021, it is not more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount.

Concentration of Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. Cash and cash equivalents consist of demand deposits, savings accounts, money market mutual funds, and certificates of deposit with financial institutions, which may exceed Federal Deposit Insurance Corporation limits. The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company grants credit to customers in the ordinary course of business. Credit evaluations are performed on an ongoing basis to reduce credit risk, and no collateral is required from our customers. An allowance for uncollectible accounts is provided for those accounts receivable considered to be uncollectible based upon historical experience and credit evaluation. Due to these factors, no additional losses beyond the amounts provided for collection losses is believed by management to be probable in the Company’s accounts receivable.

Significant customers are those that represent 10% or more of revenue or accounts receivable and are set forth in the following tables:

Revenue

Accounts Receivable, Net

Year Ended December 31,

December 31,

2022

2021

2020

2022

2021

Customer A

*

22

11

*

21

Customer B

13

*

*

*

*

Customer C

*

*

20

*

*

Customer D

*

*

*

*

19

Customer E

*

*

*

*

10

Customer F

*

*

*

12

*

Customer G

*

*

*

11

*

* Less than 10% of total

Certain of the components and subassemblies included in the Company’s products are obtained and manufactured from a single source or a limited group of suppliers. Although the Company seeks to reduce dependence on those single or limited source suppliers and manufacturers, the partial or complete loss of certain of these sources could have a material adverse effect on the Company’s operating results, financial condition and cash flows and damage its customer relationships.

Product Warranties

Substantially all of the Company’s products are covered by a warranty for software and hardware for periods ranging from 90 days to two years. In addition, in conjunction with customers’ renewals of maintenance and support contracts, the Company offers an extended warranty for periods typically of one to three years for agreed-upon fees. In the event of a failure of a hardware product or software covered by these warranties, the Company must repair or replace the software or hardware or, if those remedies are insufficient, and at the discretion of the Company, provide a refund. The Company’s warranty reserve, which is included in accrued expenses and other current liabilities in the consolidated balance sheets, reflects estimated material, labor and other costs related to potential or actual software and hardware warranty claims for which the Company expects to incur an obligation. The Company’s estimates of anticipated rates of warranty claims and the costs associated therewith are primarily based on historical information and future forecasts. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary. If the historical data used to calculate the adequacy of the warranty reserve are not indicative of future requirements, additional or reduced warranty reserves may be required.

A summary of changes in the amount reserved for warranty costs for the years ended December 31, 2022, 2021 and 2020 is as follows:


	Year Ended December 31,
	2022			2021			2020
Warranty reserve at beginning of year	$	2,392		$	2,354		$	2,448
Provisions		920			2,339			2,745
Charges		(1,634	)		(2,301	)		(2,839	)
Warranty reserve at end of year	$	1,678		$	2,392		$	2,354

Revenue Recognition

The Company generates revenue from sales of its products, along with associated maintenance, support and extended hardware warranty services, and to a lesser extent, from sales of professional services. Maintenance and support services include telephone support, bug fixes and unspecified software upgrades and updates provided on a when-and-if-available basis and/or extended hardware warranty.

In its consolidated statements of operations and comprehensive (loss) income, the Company classifies revenue from sales of cable, wireless and fixed-line broadband products as product revenue, and revenue from maintenance and support and professional services as service revenue.

In accordance with ASC 606, the Company recognizes revenue when a customer obtains control of promised products or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these products or services. To achieve the core principle of this standard, the Company applies the following five steps:

1) Identify the contract with a customer - The Company considers binding contracts and/or purchase orders to be customer contracts, provided collection is probable. The Company assesses collectability based on a number of factors that generally include information supplied by credit agencies, references and/or analysis of customer accounts and payment history. The Company combines contracts with customers if those contracts were negotiated as a single deal or contain price dependencies.

2) Identify the performance obligations in the contract – The Company identifies performance obligations as products and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the products or services is separately identifiable from other promises in the contract.

3) Determine the transaction price - The Company determines the transaction price based on the consideration to which the Company expects to be entitled in exchange for transferring products or services to the customer. The Company includes variable consideration in the transaction price if, in its judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur.

4) Allocate the transaction price to performance obligations in the contract – The Company allocates the transaction price to performance obligations based on a relative standalone selling price, or SSP.

5) Recognize revenue when or as the Company satisfies a performance obligation – The Company recognizes revenue from product sales upon delivery to the customer, which is generally when control of the asset has passed to the customer. Support revenue is generally recognized over the contract period once the associated product’s control has been passed to the customer. Professional services revenue is recognized for the fee-based arrangements upon completion of the service and receipt of acceptance, if applicable.

Performance Obligations

The majority of the Company’s contracts with customers contain multiple performance obligations including products and maintenance services, and on a limited basis, professional services. For these contracts, the Company accounts for individual performance obligations separately if they are considered distinct. The Company’s cable, wireless and fixed-line broadband products, maintenance services and professional services are considered distinct performance obligations. When multiple performance obligations exist in a customer contract, the Company allocates the transaction price to the separate performance obligations on a relative SSP basis. The Company determines SSP using its judgment and based on the best evidence available, which may include the selling price of products when sold on a standalone basis to similar customers in similar circumstances, or in the absence of standalone sales, taking into consideration the Company’s historical pricing practices by customer type, selling method (i.e., resellers or direct), and geographic-specific market factors.

Product revenue

Some of the Company’s cable, wireless and fixed-line broadband products have both software and non-software (i.e., hardware) components that function together to deliver the products’ essential functionality. In these instances, the Company’s hardware cannot be used apart from the embedded software and is considered one distinct performance obligation. The Company recognizes revenue for both new and existing customers at a point in time when control of the products is transferred to the customer, which is typically when title and risk of loss have transferred and the right to payment is enforceable. The Company also earns revenue from the sale of perpetual software licenses and/or software-enabled capacity expansions. Revenue on perpetual software licenses and software-enabled capacity expansions for existing customers are also distinct performance obligations as they are separately identifiable and provide additional bandwidth capacity on hardware products already purchased by the customer. The Company recognizes revenue on perpetual software licenses and software-enabled capacity expansions when control is transferred, which is typically as the software entitlements are made available to the customer.

When customer contracts require acceptance of product and services, the Company considers the nature of the acceptance provisions to determine if they are substantive or considered perfunctory to determine if these acceptance provisions impact the timing of revenue recognition. When acceptance provisions are considered substantive, the Company will defer revenue on all performance obligations in the contract subject to acceptance until acceptance has been received. The Company does not defer revenue when acceptance provisions are deemed perfunctory.

Maintenance and Support Services and Professional Services Revenue

Other than with respect to certain of its CPE products, the Company generally sells its products with maintenance and support services, a distinct performance obligation that includes the stand-ready obligation to provide telephone support, bug fixes and unspecified software upgrades and updates provided on a when-and-if-available basis and/or extended hardware warranty. After the initial sale, customers may purchase annual renewals of support contracts. The Company’s telephone support and unspecified upgrades and updates are delivered over time, and the Company therefore recognizes revenue ratably over the contract term, which is typically one year, but can be as long as five years. The Company also generates revenue from sales of professional services, such as installation, configuration and training. Professional services are a distinct performance obligation since the Company’s products are functional without these services and can generally be performed by the customer or a third party. The Company generally recognizes fee-based professional services delivered at a point in time as the professional services are completed and upon receipt of acceptance if applicable.

The sale of the Company’s products generally includes a 90-day warranty on the software and a one-year warranty on the hardware component of the products, which includes repair or replacement of the applicable hardware. These warranties are to ensure the products perform in accordance with the Company’s specifications and are therefore not a performance obligation. The Company records a warranty accrual for the initial software and hardware warranty included with product sales and does not defer revenue.

Resellers and Sales Agents

The Company markets and sells its products through its direct global sales force, supported by sales agents, and through resellers. The Company’s resellers receive an order from an end customer prior to placing an order with the Company, and the Company confirms the identification of or is aware of the end customer prior to accepting such order. The Company invoices the reseller an amount that reflects a reseller discount and records revenue based on the amount of the discounted transaction value. Aside from wireless and fixed-line broadband hardware products, the Company’s resellers do not stock inventory received from the Company.

When the Company transacts with a reseller, the contract is with the reseller and not with the end customer. Whether the Company transacts business with and receives the order directly from the reseller or a customer, its revenue recognition policy and resulting pattern of revenue recognition for the order are the same.

The Company has assessed whether it is principal (i.e., reports revenue on a gross basis) or agent (i.e., reports revenue on a net basis) by evaluating whether it has control of the good or service before it is transferred to the reseller. As the Company controls the promised good or service before transferring it to the reseller, it acts as the principal in the transaction. Accordingly, the Company reports revenue on a gross basis.

The Company also uses sales agents that assist in the sales process with certain customers, primarily located in the Latin America and Asia-Pacific regions. Sales agents are not resellers. If a sales agent is engaged in the sales process, the Company receives the order directly from the end customer and sells the products and services directly to the end customer, and the Company pays a commission to the sales agent, calculated as a percentage of the related transaction value. Accounting considerations related to sales agent commissions are discussed in the “Costs to Obtain or Fulfill a Contract” section below.

Costs to Obtain or Fulfill a Contract

The Company capitalizes commission expenses paid to internal sales personnel and sales agent commissions that are incremental to obtaining customer contracts, for which the related revenue is recognized over a future period greater than 12 months. These costs are incurred on initial sales of product, professional services, and maintenance and support contract renewals. The Company defers these costs and amortizes them over the period of benefit, which is generally considered to be the contract term. The Company has elected to use the practical expedient, allowing the Company to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

Commissions paid relating to maintenance and support contract renewals of twelve months or less are expensed as incurred as commissions paid on renewals are commensurate with commissions paid on initial sales transactions. Costs to obtain a contract for professional services contracts are expensed as incurred in accordance with the practical expedient as the contractual period of the Company's professional services contracts are one year or less. The Company periodically reviews the carrying amount of capitalized contract costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit.

Deferred Revenue

The Company recognizes amounts billed in excess of revenue recognized as deferred revenue. Deferred revenue includes customer deposits, amounts billed for maintenance and support services contracts in advance of services being performed, amounts for trade-in right liabilities and amounts related to contracts that have been deferred as a result of not meeting the required revenue recognition criteria as of the end of the reporting period. The Company reports deferred revenue expected to be recognized as revenue more than one year subsequent to the balance sheet date within long-term liabilities in the consolidated balance sheets.

The Company defers recognition of direct costs, such as cost of goods and services, until recognition of the related revenue. The Company classifies such costs as current assets if the related deferred revenue is classified as current and as non-current assets if the related deferred revenue is classified as non-current.

Other Revenue Recognition Policies

The Company’s customary payment terms are generally 90 days or less. The Company has elected to apply the practical expedient that allows an entity to not adjust the promised amount of consideration in customer contracts for the effect of a significant financing component when the period between the transfer of product and services and payment of the related consideration is less than one year. If the Company provides extended payment terms that represent a significant financing component, the Company adjusts the amount of promised consideration for the time value of money using an appropriate discount rate and recognizes interest income separate from the revenue recognized on contracts with customers.

In limited instances, the Company has offered future rebates to customers based on a fixed or variable percentage of actual sales volumes over specified periods. The future rebates earned based on the customer’s purchasing from the Company in one period may be used as credits to be applied by them against accounts receivable due to the Company in later periods. The Company accounts for these future rebates as variable consideration and reduces the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will occur when the variable consideration is resolved. The Company estimates the reduction of the transaction price based on historical activity and other relevant factors and recognizes it when the Company recognizes revenue for the transfer of goods and services to the customer on which the future rebate was earned. Other forms of contingent revenue or variable consideration are infrequent.

The Company excludes any taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction (e.g., sales, use and value added taxes) from its transaction price.

The Company records billings to customers for reimbursement of out-of-pocket expenses, including travel, lodging and meals, as revenue, and the associated costs incurred by the Company as cost of revenue. Revenue related to the reimbursement of out-of-pocket costs are accounted for as variable consideration.

The Company accounts for any shipping and handling activities as a fulfillment cost rather than an additional promised service. The Company records shipping and handling billed to customers as an offset to cost of revenue.

Stock-Based Compensation

The Company measures stock options and other stock-based awards granted to employees and directors based on the fair value on the date of grant and recognizes compensation expense of those awards, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues stock options with only service-based vesting conditions and records the expense for these awards using the straight-line method.

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive (loss) income in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

The Company recognizes compensation expense for only the portion of awards that are expected to vest. In developing a forfeiture rate estimate, the Company has considered its historical experience to estimate pre-vesting forfeitures for service-based awards. The impact of a forfeiture rate adjustment will be recognized in full in the period of adjustment, and if the actual forfeiture rate is materially different from the Company’s estimate, the Company may be required to record adjustments to stock-based compensation expense in future periods.

The Company estimates the fair value of each stock option and stock appreciation right, or SAR, grant on the date of grant using the Black-Scholes option pricing model. The Company was a private company until December 14, 2017 and lacked sufficient company-specific historical and implied volatility information for its stock. Therefore, for all options granted in 2020 or before, the Company estimated its expected stock volatility based on the historical volatility of publicly traded peer companies. Beginning with options granted in 2021, the Company estimates its expected stock volatility using a weighted-average calculation based on the historical volatility of the Company and publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company does not have a history of declaring or paying cash dividends, except for the special cash dividends declared in November 2014, June 2016, December 2016, May 2017 and November 2017, and in those circumstances the Company's board of directors approved cash dividends to be paid to holders of the Company’s stock options, stock appreciation rights, or SARs, and restricted stock units, or RSUs, upon vesting as an equitable adjustment to the holders of such instruments.

The Company has granted SARs to certain employees, which require the Company to pay in cash, upon exercise, an amount equal to the product of the excess of the per share fair market value of the Company’s common stock on the date of exercise over the exercise price, multiplied by the number of shares of common stock with respect to which the SAR is exercised. Because these awards may require the Company to settle the awards in cash, the Company accounts for them as a liability in the Company’s consolidated balance sheets. The Company recognizes the liability related to these awards, as well as related compensation expense, over the period during which services are rendered until completed. All SAR awards became fully vested on January 1, 2020. The Company will continue to remeasure the fair market value of the liability until the award is either exercised or canceled, with changes in the fair value of the liability recorded in the consolidated statements of operations and comprehensive (loss) income.

Research and Development Costs

The Company expenses research and development costs as incurred. The Company expenses costs incurred to develop software to be licensed to customers prior to the establishment of technological feasibility of the software and capitalizes them thereafter until commercial release of the software. The Company has not historically capitalized software development costs as the establishment of technological feasibility typically occurs shortly before the commercial release of its software, which is embedded in its products. As such, the Company expenses all software development costs related to software to be licensed to customers as incurred and includes such amounts within research and development expense in the accompanying consolidated statements of operations and comprehensive (loss) income.

Advertising Costs

The Company expenses advertising costs as incurred and includes them in selling, general and administrative expense in the accompanying consolidated statements of operations and comprehensive (loss) income. Advertising expenses were not significant for any periods presented.

Foreign Currency Translation

For the Company’s subsidiaries in Ireland and Australia, the U.S. dollar is the functional currency. For each of the Company’s other foreign subsidiaries, the functional currency is its local currency. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using period-end exchange rates, and revenue and expenses are translated into U.S. dollars using average exchange rates in effect during each period. The Company includes the effects of these foreign currency translation adjustments in accumulated other comprehensive (loss) income, a separate component of stockholders’ equity.

The Company includes foreign currency transaction (losses) gains in its consolidated statements of operations and comprehensive (loss) income as a component of other income (expense). They totaled $1,730, $(2,113), and $452 for the years ended December 31, 2022, 2021 and 2020, respectively.

Fair Value Measurements

The Company carries certain assets and liabilities at fair value under GAAP. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market

in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:


Level 1—	Quoted prices in active markets for identical assets and liabilities.

Level 2—	Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities at the measurement date; quoted prices in markets that are not active for identical or similar assets and liabilities; or other inputs that are observable or can be corroborated by observable market data.

Level 3—	Unobservable inputs that involve management judgment and are supported by little or no market activity, including pricing models, discounted cash flow methodologies and similar techniques.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company carries cash equivalents, marketable securities, foreign currency forward contracts and SARs at fair value, determined according to the fair value hierarchy described above (see Note 7, Fair Value Measurements). The fair values of cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities, with the exception of amounts recorded by the Company as “accounts receivable, non-current,” which represent amounts billed to customers for which payment has not yet become due and for which an offsetting amount of deferred revenue has been recorded. The carrying values of the Company’s debt obligations (see Note 10, Debt) as of December 31, 2022 and 2021 approximated their fair values because the debt bears interest at rates the Company would be required to pay on the issuance of debt with similar terms, based on an analysis of recent market conditions and other Company-specific factors.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities, as measured by enacted tax rates anticipated to be in effect when these differences reverse. This method also requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. The Company evaluates the potential for recovery of deferred tax assets by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. As of December 31, 2022, we determined that it is more likely than not that our worldwide net deferred tax assets will not be realized, and thus maintain a valuation allowance against our worldwide net deferred tax assets (see Note 9, Income Taxes, to our accompanying financial statements).

The Company records a liability for potential payments of taxes to various tax authorities related to uncertain tax positions and other tax matters. The Company bases the recorded liability on its determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is “more likely than not” to be realized. The amount of the benefit that may be recognized in the financial statements is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. To the extent that the assessment of such tax positions changes, the Company records the change in estimate in the period in which the determination is made. The Company establishes a liability, which is included in accrued income taxes in the consolidated balance sheets, for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The Company establishes these liabilities when the Company believes that certain positions might be challenged despite its belief that the tax return positions are fully supportable. The Company adjusts the recorded liability in light of changing facts and circumstances. The (benefit from) provision for income taxes includes the impact of the recorded liability and changes thereto.

The Company recognizes interest and penalties related to uncertain tax positions within other income (expense) in the accompanying consolidated statements of operations and comprehensive (loss) income. The Company records accrued interest and penalties in accrued income taxes in the consolidated balance sheets.

For taxable years beginning after January 1, 2018, taxpayers are subjected to the global intangible low-taxed income, or GILTI, provisions. The GILTI provisions require the Company to currently recognize in U.S. taxable income a deemed dividend inclusion of foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The ability to benefit from a deduction and foreign tax credits against a portion of the GILTI income may be limited under the GILTI rules as a result of the utilization of net operating losses, foreign sourced income, and other potential limitations within the foreign tax credit calculation. During the years ended December 31, 2022, 2021 and 2020 the Company recorded income tax charges of $695, $2,630, and $3,483, respectively, related to GILTI. The Company has made an accounting policy election to recognize the impacts of GILTI within the period incurred. Therefore, no U.S. deferred taxes are provided on GILTI inclusions of future foreign subsidiary earnings.

Comprehensive (Loss) Income

Comprehensive (loss) income includes net (loss) income as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. Comprehensive (loss) income for the periods presented consists of net (loss) income and the change in the cumulative foreign currency translation adjustment.

Net (Loss) Income per Share

Basic net (loss) income per share attributable to common stockholders is computed by dividing the net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net (loss) income attributable to common stockholders is computed by adjusting net (loss) income attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net (loss) income per share attributable to common stockholders is computed by dividing the diluted net (loss) income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock-based awards are considered potential dilutive common shares.

Impact of Recently Adopted Accounting Standards

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): Amendments to FASB Accounting Standards Codification, or ASU 2016-02, which replaces the existing guidance for leases. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve-month term, the arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. This guidance is effective for private companies, and emerging growth companies that choose to take advantage of the extended transition periods, for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Since the Company ceased to be an emerging growth company as of December 31, 2022, the Company began reporting on topics required by ASU 2016-02 for the period ended December 31, 2022, using the modified retrospective approach as permitted by the standard. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things allow for the carryforward of historical lease classification. The Company also elected the practical expedient that allows for an accounting policy election to exclude right of use assets and lease obligations from the balance sheet for all leases with an initial term of 12 months or less.

The adoption of ASU 2016-02 had a material impact on the Company's consolidated balance sheet, but did not have a material impact on the Company's consolidated statements of operations or cash flows. The most significant impact of the adoption of ASU 2016-02 was the recognition of additional right-of-use assets and lease liabilities for operating leases. Upon adoption, the Company recognized approximately $6,493 of right-of-use assets and $6,764 of lease liabilities. Refer to Note 17, Leases, for further discussion.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. This guidance is intended to provide more decision-useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The main provisions

include presenting financial assets measured at amortized cost at the amount expected to be collected, which is net of an allowance for expected credit losses and recording credit losses related to available-for-sale securities through an allowance for credit losses. The effective dates for the amendments in ASU 2016-13 were updated in ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and as such ASU 2016-13 is now effective for the Company. The Company began reporting on topics required by ASU 2016-13 for the year ended December 31, 2022. As permitted under by the standard, the company is using a modified retrospective approach. The adoption did not have a material impact on the Company's financial position or results of operations.

Business Combinations

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, or ASU 2021-08. Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. Effective January 1, 2022, the Company early adopted ASU 2021-08 on a prospective basis. The adoption did not have a material impact on the Company's financial position or results of operations.