UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________

FORM 10-Q

__________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to

Commission File Number: 001-38285 

BANDWIDTH INC.

(Exact name of registrant as specified in its charter)

__________________________________

Delaware	56-2242657
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

900 Main Campus Drive

Raleigh, NC 27606

(Address of principal executive offices) (Zip Code) 

(800) 808-5150

(Registrant’s telephone number, including area code)

__________________________________

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share	BAND	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No ☐

Indicate by check mark whether the registrant has submitted electronically and posted to its corporate web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

As of October 23, 2020, 21,403,494 shares of the registrant’s Class A common stock and 2,818,463 shares of registrant’s Class B common stock were outstanding, respectively.

BANDWIDTH INC.

Table of Contents

		Page
Special Note Regarding Forward-Looking Statements		2
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Unaudited Condensed Consolidated Balance Sheets as of December 31, 2019 and September 30, 2020	4
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2020	5
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2019 and 2020	6
	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity	7
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2019 and 2020	9
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	55
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	96
Item 6.	Exhibits	96
	Signatures	98

1

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “estimate,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations strategy, plans or intentions. Forward looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our ability to attract and retain customers, including large enterprises;

•our approach to identifying, attracting and keeping new and existing customers, as well as our expectations regarding customer turnover;

•our beliefs regarding network traffic growth and other trends related to the usage of our products and services;

•our expectations regarding revenue, costs, expenses, gross margin, dollar based net retention rate, adjusted EBITDA, non-generally accepted accounting principles in the United States of America (“GAAP”) net income and capital expenditures;

•our beliefs regarding the growth of our business and how that impacts our liquidity and capital resources requirements;

•the sufficiency of our cash and cash equivalents to meet our liquidity needs;

•our ability to attract, train, and retain qualified employees and key personnel;

•our beliefs regarding the expense and productivity of and competition for our sales force;

•our expectations regarding headcount;

•our ability to maintain and benefit from our corporate culture;

•our plans to further invest in and grow our business, including international offerings, and our ability to effectively manage our growth and associated investments;

•our ability to introduce new products and services and enhance existing products and services;

•our ability to compete successfully against current and future competitors;

•the evolution of technology affecting our products, services and markets;

•the impact of certain new accounting standards and guidance, as well as the time and cost of continued compliance with existing rules and standards;

•our beliefs regarding the use of Non-GAAP financial measures;

•our ability to comply with modified or new industry standards, laws and regulations applicable to our products, services and business, including the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act of 2018 and other privacy regulations that may be implemented in the future, and Secure Telephone Identity Revisited (“STIR”) and Signature-based Handling of Asserted Information Using toKENs (“SHAKEN”) (together, “STIR/SHAKEN”) and other robocalling prevention and anti-spam standards and increased costs associated with such compliance;

2

•our customers’ violation of our policies or other misuse of our platform;

•our ability to maintain, protect and enhance our intellectual property;

•our expectations regarding litigation and other pending or potential disputes;

•our ability to service the interest on our Convertible Notes (as defined herein) and repay such Convertible Notes, to the extent required;

•our expectations about the impact of public health epidemics, such as COVID-19, or natural disasters on our business, results of operations and financial condition; and

•our ability to successfully integrate and benefit from any strategic acquisitions, including the acquisition of Voxbone (as defined herein), or future strategic acquisitions or investments.

We caution you that the foregoing list may not contain all the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

BANDWIDTH INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	As of December 31,		As of September 30,
	2019		2020
Assets
Current assets:
Cash and cash equivalents	$	184,414	$	300,179
Restricted cash	590		1,144
Other investments	—		230,780
Accounts receivable, net of allowance for doubtful accounts	30,187		46,452
Prepaid expenses and other current assets	9,260		10,022
Deferred costs	2,498		2,238
Total current assets	226,949		590,815
Property and equipment, net	41,654		43,926
Operating right-of-use asset	21,031		17,509
Intangible assets, net	6,569		6,179
Deferred costs, non-current	1,952		3,412
Other long-term assets	1,533		1,724
Goodwill	6,867		6,867
Deferred tax asset, net	34,861		—
Total assets	$	341,416	$	670,432
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,190	$	7,776
Accrued expenses and other current liabilities	27,328		34,360
Current portion of deferred revenue	5,177		5,527
Advanced billings	4,167		5,016
Operating lease liability, current	4,876		5,162
Total current liabilities	45,738		57,841
Operating lease liability, net of current portion	19,868		15,638
Deferred revenue, net of current portion	5,720		6,331
Convertible senior notes	—		277,483
Total liabilities	71,326		357,293
Stockholders’ equity:
Class A and Class B common stock	24		24
Additional paid-in capital	275,553		342,633
Accumulated deficit	(5,528)		(29,579)
Accumulated other comprehensive income	41		61
Total stockholders’ equity	270,090		313,139
Total liabilities and stockholders’ equity	$	341,416	$	670,432

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

BANDWIDTH INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Revenue	$	60,491	$	84,758	$	170,591	$	230,066
Cost of revenue	33,104		45,527		91,980		123,895
Gross profit	27,387		39,231		78,611		106,171
Operating expenses:
Research and development	7,939		10,232		23,312		29,316
Sales and marketing	8,784		9,001		25,647		27,073
General and administrative	15,269		18,134		43,884		51,070
Total operating expenses	31,992		37,367		92,843		107,459
Operating (loss) income	(4,605)		1,864		(14,232)		(1,288)
Other income (expense), net	781		(4,206)		1,711		(8,980)
Loss before income taxes	(3,824)		(2,342)		(12,521)		(10,268)
Income tax benefit (provision)	2,810		(10)		16,971		(13,783)
Net (loss) income	$	(1,014)	$	(2,352)	$	4,450	$	(24,051)
Net (loss) income per share
Basic	$	(0.04)	$	(0.10)	$	0.20	$	(1.01)
Diluted	$	(0.04)	$	(0.10)	$	0.19	$	(1.01)
Weighted average number of common shares outstanding:
Basic	23,426,455		24,175,762		22,353,097		23,905,322
Diluted	23,426,455		24,175,762		23,692,571		23,905,322

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

BANDWIDTH INC.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Net (loss) income	$	(1,014)	$	(2,352)	$	4,450	$	(24,051)
Other comprehensive (loss) income
Unrealized loss on marketable securities, net of income taxes	(21)		—		—		—
Foreign currency translation, net of income taxes	(46)		139		(34)		20
Other comprehensive (loss) income	(67)		139		(34)		20
Total comprehensive (loss) income	$	(1,081)	$	(2,213)	$	4,416	$	(24,031)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

BANDWIDTH INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

	Class A voting common stock			Class B voting common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2018	12,912,747	$	13	6,510,732	$	6	$	116,600	$	(1)	$	(7,848)	$	108,770
Issuance of common stock in connection with follow on public offering, net of underwriting discounts	2,875,000	3		—	—		147,388		—		—		147,391
Costs in connection with public offering	—	—		—	—		(785)		—		—		(785)
Exercises of vested stock options	589,510	1		—	—		3,934		—		—		3,935
Vesting of restricted stock units	105,367	—		—	—		—		—		—		—
Equity awards withheld for tax liability	(16,585)	—		—	—		(938)		—		—		(938)
Conversion of Class B voting common stock to Class A voting common stock	57,230	—		(57,230)	—		—		—		—		—
Adjustment to opening retained earnings due to adoption of ASC 606	—	—		—	—		—		—		(174)		(174)
Unrealized gain on marketable securities	—	—		—	—		—		8		—		8
Stock based compensation	—	—		—	—		1,676		—		—		1,676
Net income	—	—		—	—		—		—		1,992		1,992
Balance at March 31, 2019	16,523,269	17		6,453,502	6		267,875		7		(6,030)		261,875
Costs in connection with public offering	—	—		—	—		(49)		—		—		(49)
Exercises of vested stock options	366,405	—		—	—		2,446		—		—		2,446
Vesting of restricted stock units	20,003	—		—	—		—		—		—		—
Equity awards withheld for tax liability	(3,665)	—		—	—		(274)		—		—		(274)
Conversion of Class B voting common stock to Class A voting common stock	826,441	1		(826,441)	(1)		—		—		—		—
Unrealized gain on marketable securities	—	—		—	—		—		13		—		13
Foreign currency translation	—	—		—	—		—		12		—		12
Stock based compensation	—	—		—	—		1,630		—		—		1,630
Net income	—	—		—	—		—		—		3,472		3,472
Balance at June 30, 2019	17,732,453	18		5,627,061	5		271,628		32		(2,558)		269,125
Exercises of vested stock options	108,361	—		—	—		868		—		—		868
Vesting of restricted stock units	19,064	—		—	—		—		—		—		—
Equity awards withheld for tax liability	(2,762)	—		—	—		(180)		—		—		(180)
Conversion of Class B voting common stock to Class A voting common stock	449,660	—		(449,660)	—		—		—		—		—
Unrealized loss on marketable securities	—	—		—	—		—		(21)		—		(21)
Foreign currency translation	—	—		—	—		—		(46)		—		(46)
Stock based compensation	—	—		—	—		1,654		—		—		1,654
Net loss	—	—		—	—		—		—		(1,014)		(1,014)
Balance at September 30, 2019	18,306,776	18		5,177,401	5		273,970		(35)		(3,572)		270,386
Exercises of vested stock options	11,206	—		—	—		108		—		—		108
Vesting of restricted stock units	19,510	—		—	—		—		—		—		—

7

BANDWIDTH INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

Equity awards withheld for tax liability	(3,014)	—		—	—		(191)		—		—		(191)
Conversion of Class B voting common stock to Class A voting common stock	250,000	1		(250,000)	—		—		—		—		1
Unrealized gain on marketable securities	—	—		—	—		—		1		—		1
Foreign currency translation	—	—		—	—		—		75		—		75
Stock based compensation	—	—		—	—		1,666						1,666
Net loss	—	—		—	—		—		—		(1,956)		(1,956)
Balance at December 31, 2019	18,584,478	19		4,927,401	5		275,553		41		(5,528)		270,090
Issuance of debt conversion option	—	—		—	—		104,553		—		—		104,553
Debt conversion option issuance costs, net of tax	—	—		—	—		(3,731)		—		—		(3,731)
Capped call option purchase price	—	—		—	—		(43,320)		—		—		(43,320)
Exercises of vested stock options	32,059	—		—	—		244		—		—		244
Vesting of restricted stock units	103,824	—		—	—		—		—		—		—
Equity awards withheld for tax liability	(14,411)	—		—	—		(1,021)		—		—		(1,021)
Conversion of Class B voting common stock to Class A voting common stock	500,250	—		(500,250)	(1)		—		—		—		(1)
Foreign currency translation	—	—		—	—		—		(96)		—		(96)
Stock based compensation	—	—		—	—		2,499		—		—		2,499
Net loss	—	—		—	—		—		—		(1,058)		(1,058)
Balance at March 31, 2020	19,206,200	19		4,427,151	4		334,777		(55)		(6,586)		328,159
Debt conversion option issuance costs, net of tax	—	—		—	—		(11)		—		—		(11)
Exercises of vested stock options	502,182	1		—	—		3,296		—		—		3,297
Vesting of restricted stock units	21,871	—		—	—		—		—		—		—
Equity awards withheld for tax liability	(2,133)	—		—	—		(272)		—		—		(272)
Conversion of Class B voting common stock to Class A voting common stock	827,597	—		(827,597)	—		—		—		—		—
Foreign currency translation	—	—		—	—		—		(23)		—		(23)
Stock based compensation	—	—		—	—		2,425		—		—		2,425
Net loss	—	—		—	—		—		—		(20,641)		(20,641)
Balance at June 30, 2020	20,555,717	20		3,599,554	4		340,215		(78)		(27,227)		312,934
Exercises of vested stock options	44,848	—		—	—		386		—		—		386
Vesting of restricted stock units	17,948	—		—	—		—		—		—		—
Equity awards withheld for tax liability	(2,002)	—		—	—		(350)		—		—		(350)
Conversion of Class B voting common stock to Class A voting common stock	606,418	1		(606,418)	(1)		—		—		—		—
Foreign currency translation	—	—		—	—		—		139		—		139
Stock based compensation	—	—		—	—		2,382		—		—		2,382
Net loss	—	—		—	—		—		—		(2,352)		(2,352)
Balance at September 30, 2020	21,222,929	$	21	2,993,136	$	3	$	342,633	$	61	$	(29,579)	$	313,139

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

BANDWIDTH INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine months ended September 30,
	2019		2020
Cash flows from operating activities
Net income (loss)	$	4,450	$	(24,051)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Depreciation and amortization	6,628		9,927
Right-of-use asset amortization	3,126		3,522
Accretion of bond discount	(700)		—
Gain on sale of marketable securities	(4)		—
Amortization of debt discount and issuance costs	159		10,916
Stock-based compensation	4,960		7,306
Deferred taxes	(17,091)		14,254
Loss on disposal of property and equipment	354		263
Changes in operating assets and liabilities:
Accounts receivable, net of allowances	(5,304)		(16,218)
Prepaid expenses and other assets	(3,046)		(1,024)
Deferred costs	(42)		(1,200)
Accounts payable	(169)		2,905
Accrued expenses and other liabilities	4,696		6,865
Deferred revenue and advanced billings	985		1,810
Operating right-of-use liability	(2,482)		(3,944)
Net cash (used in) provided by operating activities	(3,480)		11,331
Cash flows from investing activities
Purchase of property and equipment	(13,088)		(9,536)
Capitalized software development costs	(2,749)		(1,846)
Purchase of marketable securities	(68,361)		—
Proceeds from sales and maturities of marketable securities	86,468		—
Purchase of other investments	—		(230,780)
Net cash provided by (used in) investing activities	2,270		(242,162)
Cash flows from financing activities
Proceeds from the follow-on public offering, net of underwriting discounts	147,391		—
Payment of costs related to the follow-on public offering	(757)		—
Proceeds from issuance of convertible senior notes	—		400,000
Payment of debt issuance costs	(142)		(11,965)
Purchase of capped call	—		(43,320)
Proceeds from exercises of stock options	7,249		3,859
Value of equity awards withheld for tax liabilities	(1,212)		(1,472)
Net cash provided by financing activities	152,529		347,102

9

BANDWIDTH INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(19)		48
Net increase in cash, cash equivalents, and restricted cash	151,300		116,319
Cash, cash equivalents, and restricted cash, beginning of period	41,501		185,004
Cash, cash equivalents, and restricted cash, end of period	$	192,801	$	301,323
Supplemental disclosure of cash flow information
Cash paid for interest	$	304	$	556
Cash refunded for taxes, net	$	(178)	$	(152)
Supplemental disclosure of noncash investing and financing activities
Purchase of property and equipment, accrued but not paid	$	2,971	$	2,073
Equity awards withheld for tax liabilities, accrued but not paid	$	180	$	348

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10

BANDWIDTH INC.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

(Unaudited)

1. Organization and Description of Business

Bandwidth Inc. (together with its subsidiaries, “Bandwidth” or the “Company”) was founded in July 2000 and incorporated in Delaware on March 29, 2001. The Company’s headquarters are located in Raleigh, North Carolina. The Company is a cloud-based, software-powered communications platform-as-a-service (“CPaaS”) provider that enables enterprises to create, scale and operate voice or messaging communications services across any mobile application or connected device.

The Company has two operating and reportable segments, CPaaS and Other. CPaaS revenue is derived from usage and monthly services fees charged for usage of Voice, Messaging, 911 and Phone Numbers solutions through the Company’s proprietary CPaaS software application programming interfaces. Other revenue consists of fees charged for services provided such as: SIP trunking, data resale, and a hosted Voice-over Internet Protocol (“VoIP”). The Other segment also includes revenue from traffic generated by other carriers, SMS registration fees and other miscellaneous product lines.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K filed with the SEC on February 21, 2020.

The condensed consolidated balance sheet as of December 31, 2019, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures, including certain notes required by GAAP on an annual reporting basis.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive (loss) income and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2020 or any future period.

Reclassification

The Company reclassified certain prior year amounts to conform to the current year presentation. These reclassifications had no impact on the previously reported total assets, liabilities, stockholder’s deficit or net income.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Bandwidth Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

11

Notes to Condensed Consolidated Financial Statements (continued)

(In thousands, except share and per share amounts)

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the amounts reported in these financial statements and accompanying notes. These estimates in the condensed consolidated financial statements include, but are not limited to, allowance for doubtful accounts, reserve for expected credit losses, reserve for sales credits, recoverability of long lived and intangible assets, discount rates used in the valuation of right-of-use assets and lease liabilities, the fair value of the liability and equity components of the Company’s Convertible Notes (as defined herein), estimated period of benefit, valuation allowances on deferred tax assets, certain accrued expenses, and contingencies. Although the Company believes that the estimates it uses are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates.

Effective January 1, 2020, due to the continued growth in customers and low churn rates, the Company updated its calculation of the estimated period of benefit for nonrefundable upfront fees from 3 years to 4 years. For the three and nine months ended September 30, 2020, the Company reduced total revenue by approximately $