Balance Sheet Components

9 Months Ended

Oct. 03, 2020

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 one to eighteen months.

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


	Three Months Ended		Nine Months Ended
	October 3, 2020		October 3, 2020

Beginning balances	$	37,215	$	40,842
Deferral of revenue	37,708		61,972
Recognition of deferred revenue	(20,279)		(48,170)
Ending balances	$	54,644	$	54,644

Revenue Returns Reserve

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


	Three Months Ended				Nine Months Ended
	October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019

Beginning balances	$	81,851	$	75,044	$	101,326	$	104,001
Increases (1)	37,422		41,945		103,127		119,070
Returns taken	(25,976)		(42,845)		(111,156)		(148,927)
Ending balances	$	93,297	$	74,144	$	93,297	$	74,144

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

Inventories

Inventories consisted of the following (in thousands)


	October 3, 2020		December 31, 2019

Components	$	471	$	5,397
Finished goods	98,525		131,355
Total inventories	$	98,996	$	136,752

Prepaid Expenses and Other Current Assets

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


	October 3, 2020		December 31, 2019

Prepaid expenses	$	18,910	$	11,219
Prepaid marketing	2,937		3,347
Tariff receivable	2,730		—


Other	10,436		14,090
Total prepaid expenses and other current assets	$	35,013	$	28,656

Property and Equipment, Net

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



	October 3, 2020		December 31, 2019

Tooling and manufacturing equipment	$	120,895	$	103,177
Furniture and office equipment	20,511		19,922
Purchased and internally-developed software	30,528		27,424
Leasehold improvements	60,941		59,926
Total property and equipment	232,875		210,449
Less: Accumulated depreciation and amortization	(158,191)		(127,693)
Property and equipment, net	$	74,684	$	82,756

Total depreciation expense related to property and equipment, net was $12.3 million and $13.1 million for the three months ended October 3, 2020 and September 28, 2019, respectively, and $33.3 million and $43.2 million for the nine months ended October 3, 2020 and September 28, 2019, respectively.

Goodwill and Intangible Assets, Net

The carrying amount of goodwill was $64.8 million as of October 3, 2020 and December 31, 2019.

The carrying amounts of the intangible assets as of October 3, 2020 and December 31, 2019 were as follows (in thousands):


	October 3, 2020						December 31, 2019
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net

Developed technology	$	37,813	$	(29,418)	$	8,395	$	37,813	$	(23,910)	$	13,903
Customer relationships	3,918		(3,918)		—		3,790		(991)		2,799
Trademarks and other	1,150		(1,150)		—		1,278		(1,234)		44
Total intangible assets, net	$	42,881	$	(34,486)	$	8,395	$	42,881	$	(26,135)	$	16,746

Total amortization expense related to intangible assets was $1.3 million and $2.0 million for the three months ended October 3, 2020 and September 28, 2019, respectively, and $8.4 million and $6.1 million for the nine months ended October 3, 2020 and September 28, 2019, respectively.

The estimated future amortization expense of acquired finite-lived intangible assets to be charged to cost of revenue and operating expenses after October 3, 2020 is as follows (in thousands):


	Cost of Revenue		Operating Expenses		Total

Remaining 2020	$	1,259	$	14	$	1,273
2021	5,037		206		5,243
2022	1,488		131		1,619
2023	—		56		56
2024	—		56		56
Thereafter	—		148		148
Total finite-lived intangible assets, net	$	7,784	$	611	$	8,395

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


	October 3, 2020		December 31, 2019

Sales returns reserve	$	93,297	$	101,326
Accrued sales incentives	82,740		156,839
Employee-related liabilities	73,272		37,355
Product warranty	39,023		52,403
Inventory received but not billed	30,940		1,669
Accrued manufacturing expense and freight	23,313		35,112
Accrued co-op advertising and marketing development funds	22,888		40,689
Accrued research and development	20,832		19,232
Accrued sales and marketing	14,186		26,781
Sales taxes and VAT payable	10,364		19,603
Accrued legal settlements and fees	8,725		8,854
Finance lease liabilities	2,338		1,384
Derivative liabilities	—		748
Other accrued liabilities	9,297		11,535
Accrued liabilities	$	431,215	$	513,530

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


	Three Months Ended				Nine Months Ended
	October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019

Beginning balances	$	44,934	$	45,260	$	52,403	$	45,605
Charged to cost of revenue	10,521		11,019		24,851		28,247
Changes related to pre-existing warranties	(4,801)		2,201		(5,555)		4,874
Settlement of claims	(11,631)		(13,576)		(32,676)		(33,822)
Ending balances	$	39,023	$	44,904	$	39,023	$	44,904