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Balance Sheet Components

9 Months Ended

Sep. 28, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Deferred Revenue

Deferred revenue relates to performance obligations for which payments have been received by the customer prior to revenue recognition. Deferred revenue primarily consists of deferred software, or amounts allocated to mobile dashboard and on-line apps and unspecified upgrade rights. Deferred revenue also includes deferred subscription-based services. The deferred software and deferred subscription-based service performance obligations are anticipated to be recognized over the useful life or service periods of twelve to seventeen months.

Changes in the total short-term and long-term deferred revenue balances were as follows (in thousands):



	Three Months Ended			Nine Months Ended
	September 28, 2019			September 28, 2019

Beginning balances	$	33,361		$	36,836
Deferral of revenue	10,515			27,325
Recognition of deferred revenue	(9,626		)	(29,911		)
Ending balances	$	34,250		$	34,250

Revenue Returns Reserve

Revenue returns reserve activities were as follows (in thousands):



	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018

Beginning balances	$	75,044		$	74,996		$	104,001		$	109,872
Increases ⁽¹⁾	41,945			43,383			119,070			106,385
Returns taken	(42,845		)	(39,862		)	(148,927		)	(137,740		)
Ending balances	$	74,144		$	78,517		$	74,144		$	78,517


⁽¹⁾	Increases in the revenue returns reserve include provisions for open box returns and stock rotations.

Inventories

Inventories consisted of the following (in thousands):



	September 28, 2019		December 31, 2018

Components	$	6,504	$	8,866
Finished goods	238,592		116,005
Total inventories	$	245,096	$	124,871

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):



	September 28, 2019		December 31, 2018

Prepaid expenses	$	10,841	$	18,100
Point-of-purchase (“POP”) displays, net	3,467		5,143
Prepaid marketing	2,941		3,258
Derivative asset	775		623
Other	15,352		15,201
Total prepaid expenses and other current assets	$	33,376	$	42,325

Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):




	September 28, 2019			December 31, 2018

Tooling and manufacturing equipment	$	98,773		$	80,685
Furniture and office equipment	20,015			22,738
Purchased and internally-developed software	26,634			21,741
Leasehold improvements	59,741			67,715
Total property and equipment	205,163			192,879
Less: Accumulated depreciation and amortization	(116,931		)	(86,593		)
Property and equipment, net	$	88,232		$	106,286

Total depreciation expense related to property and equipment, net was $13.1 million and $11.8 million for the three months ended September 28, 2019 and September 29, 2018, respectively, and $43.2 million and $35.4 million for the nine months ended September 28, 2019 and September 29, 2018, respectively.

Goodwill and Intangible Assets

The carrying amount of goodwill was $61.0 million as of September 28, 2019 and December 31, 2018.

The carrying amounts of the intangible assets as of September 28, 2019 and December 31, 2018 were as follows (in thousands):



	September 28, 2019							December 31, 2018
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net

Developed technology	$	35,988	$	(21,506	)	$	14,482	$	35,988	$	(15,983	)	$	20,005
Customer relationships	3,790		(857		)	2,933		3,790		(451		)	3,339
Trademarks and other	1,278		(1,174		)	104		1,278		(1,002		)	276
Total intangible assets, net	$	41,056	$	(23,537	)	$	17,519	$	41,056	$	(17,436	)	$	23,620

Total amortization expense related to intangible assets was $2.0 million and $2.1 million for the three months ended September 28, 2019 and September 29, 2018, respectively, and $6.1 million and $5.9 million for the nine months ended September 28, 2019 and September 29, 2018, respectively.

The estimated future amortization expense of acquired finite-lived intangible assets to be charged to cost of revenue and operating expenses after September 28, 2019 is as follows (in thousands):



	Cost of Revenue		Operating Expenses		Total

Remaining 2019	$	2,392	$	207	$	2,599
2020	6,192		643		6,835
2021	4,504		597		5,101
2022	955		597		1,552
2023	—		597		597
Thereafter	—		835		835
Total finite-lived intangible assets, net	$	14,043	$	3,476	$	17,519

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):



	September 28, 2019		December 31, 2018
	September 28, 2019		December 31, 2018
Accrued sales incentives	$	92,087	$	126,400
Accrued revenue reserve from returns	74,144		104,001
Product warranty	44,904		45,605
Accrued manufacturing expense and freight	36,952		21,357
Accrued sales and marketing	29,725		18,171
Accrued co-op advertising and marketing development funds	27,783		30,435
Accrued research and development	16,521		8,783
Sales taxes and VAT payable	14,108		20,121
Employee-related liabilities	13,513		33,916
Inventory received but not billed	4,397		6,373
Accrued legal settlements and fees	3,375		2,821
Finance lease liabilities	464		—
Derivative liabilities	9		549
Other	7,830		18,702
Accrued liabilities	$	365,812	$	437,234

Product warranty reserve activities were as follows (in thousands):



	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018

Beginning balances	$	45,260		$	50,468		$	45,605		$	87,882
Charged to cost of revenue	11,019			9,245			28,247			(1,722		)
Changes related to pre-existing warranties	2,201			(1,354		)	4,874			(9,226		)
Settlement of claims	(13,576		)	(10,504		)	(33,822		)	(29,079		)
Ending balances	$	44,904		$	47,855		$	44,904		$	47,855

Accumulated Other Comprehensive Income (Loss)

The components and activity of accumulated other comprehensive income (“AOCI”), net of tax, were as follows (in thousands):



	Unrealized Gains (Losses) on Cash Flow Hedges			Currency Translation Adjustments		Unrealized Gains (Losses) on Available-for-Sale Investments			Total

Balance at December 31, 2018	$	66		$	—	$	(132	)	$	(66	)
Other comprehensive income (loss) before reclassifications	(66		)	—		364			298
Other comprehensive income (loss)	(66		)	—		364			298
Balance at September 28, 2019	$	—		$	—	$	232		$	232