Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include accounts of the Company and all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of March 31, 2023, results of operations for the three months ended March 31, 2023 and 2022, cash flows for the three months ended March 31, 2023 and 2022, and stockholders' (deficit) equity for the three months ended March 31, 2023 and 2022.

Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make, on an ongoing basis, estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Such estimates include, but are not limited to, those related to revenue recognition, accounts receivable and related reserves, useful lives and realizability of long-lived assets, capitalized internal-use software development costs, accounting for stock-based compensation, the incremental borrowing rate used to determine lease liabilities, valuation allowances against deferred tax assets, and the fair value and useful lives of tangible and intangible assets acquired and liabilities assumed resulting from business combinations. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Reclassifications

As previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022, the Company adopted Accounting Standard Update 2016-02, Leases (“ASC 842”) using the modified retrospective transition method as of the first day of fiscal year 2022. The impact of the adoption of ASC 842 on previously reported interim financial statements during the year ended December 31, 2022, included the recognition of right-of-use assets and lease liabilities for operating leases. The adoption of ASC 842 also resulted in changes to certain lines within operating activities in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statement of Cash Flows due to changes in operating assets and liabilities for the related accounts. These changes to previously disclosed amounts conform to the current period presentation. Additionally, certain other reclassifications were made to prior period amounts in order to conform to the current period presentation.

Restricted Cash

The following table reconciles cash, cash equivalents and restricted cash per the Condensed Consolidated Statements of Cash Flows:


	March 31,
	2023		2022
Cash and cash equivalents	$	20,872	$	464,836
Restricted cash included in Prepaid expenses and other current assets(1)	9,100		—
Restricted cash(2)	1,747		2,038
Total cash, cash equivalents and restricted cash	$	31,719	$	466,874

___________________

(1)Includes contingent compensation deposits related to the Cloudways acquisition.

(2)Includes deposits in financial institutions related to letters of credit used to secure lease agreements.

Accounts Receivable Net of Allowance for Expected Credit Losses

Accounts receivable primarily represents revenue recognized that was not invoiced at the balance sheet date and is primarily billed and collected in the following month. Trade accounts receivable are carried at the original invoiced amount less an estimated allowance for expected credit losses based on the probability of future collection. Management determines the adequacy of the allowance based on historical loss patterns, the number of days that customer invoices are past due, reasonable and supportable forecasts of future economic conditions to inform adjustments over historical loss data, and an evaluation of the potential risk of loss associated with specific accounts. When management becomes aware of circumstances that may further decrease the likelihood of collection, it records a specific allowance against amounts due, which reduces the receivable to the amount that management reasonably believes will be collected. The Company records changes in the estimate to the allowance for expected credit losses through provision for expected credit losses and reverses the allowance after the potential for recovery is considered remote.

The following table presents the changes in our allowance for expected credit losses for the period presented:


	Amount


Balance as of December 31, 2022	$	6,099
Provision for expected credit losses	3,987

Write-offs and other	(3,938)
Balance as of March 31, 2023	$	6,148

Deferred Revenue

Deferred revenue was $5,015 and $5,550 as of March 31, 2023 and December 31, 2022, respectively. Revenue recognized during the three months ended March 31, 2023 and 2022 was $2,118 and $1,735, respectively, which was included in each deferred revenue balance at the beginning of each respective period.

Restructuring Expenses

The Company records restructuring expenses when management commits to a restructuring plan, the restructuring plan identifies all significant actions, the period of time to complete the restructuring plan indicates that significant changes to the plan are not likely, and employees who are impacted have been notified.

Segment Information

The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions, allocation of resources, and assessing financial performance. Accordingly, the Company has one operating and reporting segment.

Geographical Information

Revenue, as determined based on the billing address of the Company’s customers, was as follows:


	Three Months Ended March 31,
	2023		2022
North America	38	%	38	%
Europe	29		29
Asia	23		23
Other	10		10
Total	100	%	100	%

Revenue derived from customers in the United States was 31% of total revenue for the three months ended March 31, 2023 and 2022.

Long-lived assets includes property and equipment and operating leases. The geographic locations of the Company’s long-lived assets, net, based on physical location of the assets is as follows:


	March 31, 2023		December 31, 2022
United States	$	207,448	$	206,118
Singapore	57,150		60,607
Germany	71,232		50,274
Netherlands	54,777		35,951
Other	72,866		74,721
Total	$	463,473	$	427,671

Concentration of Credit Risk

The amounts reflected in the Condensed Consolidated Balance Sheets for cash and cash equivalents, marketable securities, restricted cash, and trade accounts receivable are exposed to concentrations of credit risk. Although the Company maintains cash and cash equivalents with multiple financial institutions, the deposits, at times, may exceed federally insured limits. The Company believes that the financial institutions that hold its cash and cash equivalents are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

The Company’s customer base consists of a significant number of geographically dispersed customers. No customer represented 10% or more of accounts receivable, net as of March 31, 2023 and December 31, 2022. Additionally, no customer accounted for 10% or more of total revenue during the three months ended March 31, 2023 and 2022.