☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedJune 30, 2019
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: 001-38897
____________________________
FASTLY, INC.
(Exact name of registrant as specified in its charter)
____________________________
Delaware
27-5411834
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
475 Brannan Street, Suite 300
San Francisco, CA94107
(Address of principal executive offices) (Zip code)
(844) 432-7859
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, or former fiscal year, if changed since last report)
____________________________
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, $0.00002 par value
FSLY
The New York Stock Exchange
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 ☐No☒
Indicate by check mark whether the registrant has submitted electronically 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☒ 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 August 7, 2019, 13,036,488 shares of the registrants’ Class A common stock were outstanding and 80,433,917 shares of registrant's Class B common stock were outstanding.
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"), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "anticipate," "believe," "continue," "could," "design," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "project," "should," "will," or the negative of these terms or other similar expressions.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q, regarding, among other things:
•
our ability to attract and retain customers;
•
our ability to increase the usage of our platform by existing customers;
•
defects, interruptions, security breaches, delays in performance, or similar problems with our platform;
•
our financial performance, including our revenue, cost of revenue, operating expenses, and our ability to attain and sustain profitability;
•
our ability to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences;
•
the growth of our relevant markets;
•
our platform’s functionality, scalability, performance, ease of use, reliability, and cost effectiveness relative to that of our competitors’ products and services;
•
our ability to compete effectively with existing competitors and new market entrants;
•
our ability to attract and retain qualified employees and key personnel;
•
our ability to maintain, protect, and enhance our intellectual property; and
•
our ability to comply with laws and regulations that currently apply or may become applicable to our business both in the United States and internationally.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have
3
filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (www.investors.fastly.com), our filings with the Securities and Exchange Commission, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.
4
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FASTLY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
As of June 30, 2019
As of December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
213,463
$
36,963
Marketable securities
32,156
46,679
Accounts receivable, net of allowance for doubtful accounts of $1,525 and $1,679 as of June 30, 2019 and December 31, 2018, respectively
28,542
24,729
Prepaid expenses and other current assets
12,192
8,896
Total current assets
286,353
117,267
Property and equipment, net
55,610
42,354
Goodwill
359
360
Intangible assets, net
1,198
610
Other assets
12,856
2,163
Total assets
$
356,376
$
162,754
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable
$
5,753
$
2,333
Accrued expenses
25,101
15,535
Current portion of long-term debt
32,822
11,370
Other current liabilities
1,589
2,512
Total current liabilities
65,265
31,750
Long-term debt, less current portion
17,878
39,439
Convertible preferred stock warrant liabilities
—
3,261
Other long-term liabilities
5,911
647
Total liabilities
89,054
75,097
Commitments and contingencies (Note 9)
Convertible preferred stock
—
219,584
Stockholders’ equity (deficit):
Class A and Class B common stock
2
1
Additional paid-in capital
435,189
16,403
Treasury stock
(2,109
)
(2,109
)
Accumulated other comprehensive income (loss)
13
(36
)
Accumulated deficit
(165,773
)
(146,186
)
Total stockholders’ equity (deficit)
267,322
(131,927
)
Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)
$
356,376
$
162,754
See Notes to Condensed Consolidated Financial Statements.
5
FASTLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
(unaudited)
Three months ended June 30,
Six months ended June 30,
2019
2018
2019
2018
Revenue
$
46,173
$
34,448
$
91,729
$
66,946
Cost of revenue
20,784
15,695
40,502
31,079
Gross profit
25,389
18,753
51,227
35,867
Operating expenses:
Research and development
11,244
8,099
21,420
16,078
Sales and marketing
16,906
11,973
31,945
24,316
General and administrative
8,920
4,130
17,620
9,832
Total operating expenses
37,070
24,202
70,985
50,226
Loss from operations
(11,681
)
(5,449
)
(19,758
)
(14,359
)
Interest income
861
147
1,277
284
Interest expense
(2,989
)
(359
)
(4,224
)
(740
)
Other expense, net
(1,696
)
(140
)
(2,472
)
(234
)
Loss before income taxes
(15,505
)
(5,801
)
(25,177
)
(15,049
)
Income taxes
82
35
137
93
Net loss
$
(15,587
)
$
(5,836
)
$
(25,314
)
$
(15,142
)
Other comprehensive (loss) income:
Foreign currency translation adjustment
$
(21
)
$
(46
)
$
7
$
16
Loss on investments in available-for-sale-securities
14
8
42
6
Total other comprehensive (loss) income
$
(7
)
$
(38
)
$
49
$
22
Comprehensive loss
$
(15,594
)
$
(5,874
)
$
(25,265
)
$
(15,120
)
Net loss attributable to common stockholders
$
(15,587
)
$
(5,836
)
$
(25,314
)
$
(15,142
)
Net loss per share attributable to common stockholders, basic and diluted
$
(0.26
)
$
(0.24
)
$
(0.59
)
$
(0.63
)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
59,781
24,127
42,599
24,034
See Notes to Condensed Consolidated Financial Statements.
6
FASTLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share amounts)
(unaudited)
Three months ended June 30, 2019
Convertible
Preferred Shares
Common Stock—Class A
Common Stock—Class B
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
Shares
Amount
Balance as of April 1, 2019
53,630,213
$
219,584
—
$
—
25,521,408
$
1
$
18,676
$
(2,109
)
$
20
$
(150,186
)
$
(133,598
)
Conversion of convertible preferred stock to Class B common stock
(53,630,213
)
(219,584
)
—
—
53,630,213
1
219,583
—
—
—
219,584
Conversion of convertible preferred stock warrants into Class B common stock warrants
—
—
—
—
—
—
5,665
—
—
—
5,665
Issuance of Class A common stock in connection with the IPO, net of underwriting discounts
—
—
12,937,500
—
—
—
186,912
—
—
—
186,912
Exercise of stock options
—
—
57,658
—
761,479
—
1,893
—
—
—
1,893
Exercise of common stock warrants
—
—
—
—
172,380
—
—
—
—
—
—
Vesting of early exercised stock options
—
—
—
—
40,530
—
155
—
—
—
155
Stock-based compensation
—
—
—
—
—
—
2,243
—
—
—
2,243
Repayment of stockholder note
—
—
—
—
26,642
—
62
—
—
—
62
Net loss
—
—
—
—
—
—
—
—
(15,587
)
(15,587
)
Other comprehensive loss
—
—
—
—
—
—
—
—
(7
)
—
(7
)
Balance as of June 30, 2019
—
$
—
12,995,158
$
—
80,152,652
$
2
$
435,189
$
(2,109
)
$
13
$
(165,773
)
$
267,322
Three months ended June 30, 2018
Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Deficit
Shares
Amount
Shares
Amount
Balance at April 1, 2018
49,718,084
$
179,705
24,035,354
$
1
$
11,440
$
(2,109
)
$
36
$
(124,557
)
$
(115,189
)
Issuance of Series F Preferred stock, net of issuance costs of $121
3,832,362
39,063
—
—
—
—
—
—
—
Exercise of stock options
—
—
318,377
—
517
—
—
—
517
Vesting of early exercised stock options
—
—
11,795
—
30
—
—
—
30
Stock-based compensation
—
—
—
—
990
—
—
—
990
Repayment of stockholder note
—
—
8,828
—
20
—
—
—
20
Net loss
—
—
—
—
—
—
—
(5,836
)
(5,836
)
Other comprehensive loss
—
—
—
—
—
—
(38
)
—
(38
)
Balance as of June 30, 2018
53,550,446
$
218,768
24,374,354
$
1
$
12,997
$
(2,109
)
$
(2
)
$
(130,393
)
$
(119,506
)
7
FASTLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)—Continued
(in thousands, except share amounts)
(unaudited)
Six months ended June 30, 2019
Convertible
Preferred Shares
Common Stock—Class A
Common Stock—Class B
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
Shares
Amount
Balance as of January 1, 2019
53,630,213
$
219,584
—
$
—
25,025,836
$
1
$
16,403
$
(2,109
)
$
(36
)
$
(146,186
)
$
(131,927
)
Impact of change in accounting policy
—
—
—
—
—
—
—
—
—
5,727
5,727
Conversion of convertible preferred stock to Class B common stock
(53,630,213
)
(219,584
)
—
—
53,630,213
1
219,583
—
—
—
219,584
Conversion of convertible preferred stock warrants into Class B common stock warrants
—
—
—
—
—
—
5,665
—
—
—
5,665
Issuance of Class A common stock in connection with the IPO, net of underwriting discounts
—
—
12,937,500
—
—
—
186,912
—
—
—
186,912
Exercise of stock options
—
—
57,658
—
1,211,230
—
2,532
—
—
—
2,532
Exercise of common stock warrants
—
—
—
—
172,380
—
—
—
—
—
—
Vesting of early exercised stock options
—
—
—
—
81,054
—
310
—
—
—
310
Stock-based compensation
—
—
—
—
—
—
3,710
—
—
—
3,710
Repayment of stockholder note
—
—
—
—
31,939
—
74
—
—
—
74
Net loss
—
—
—
—
—
—
—
—
—
(25,314
)
(25,314
)
Other comprehensive loss
—
—
—
—
—
—
—
—
49
—
49
Balance as of June 30, 2019
—
$
—
12,995,158
$
—
80,152,652
$
2
$
435,189
$
(2,109
)
$
13
$
(165,773
)
$
267,322
Six months ended June 30, 2018
Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Deficit
Shares
Amount
Shares
Amount
Balance at January 1, 2018
49,718,084
$
179,705
23,879,074
$
1
$
10,377
$
(2,109
)
$
(24
)
$
(115,251
)
$
(107,006
)
Issuance of Series F Preferred stock, net of issuance costs of $121
3,832,362
39,063
—
—
—
—
—
—
—
Exercise of stock options
—
—
438,186
—
692
—
—
—
692
Vesting of early exercised stock options
—
—
48,266
—
70
—
—
—
70
Stock-based compensation
—
—
—
—
1,838
—
—
—
1,838
Repayment of stockholder note
—
—
8,828
—
20
—
—
—
20
Net loss
—
—
—
—
—
—
—
(15,142
)
(15,142
)
Other comprehensive loss
—
—
—
—
—
—
22
—
22
Balance as of June 30, 2018
53,550,446
$
218,768
24,374,354
$
1
$
12,997
$
(2,109
)
$
(2
)
$
(130,393
)
$
(119,506
)
See Notes to Condensed Consolidated Financial Statements.
8
FASTLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended June 30,
2019
2018
Cash flows from operating activities:
Net loss
$
(25,314
)
$
(15,142
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
7,624
6,295
Amortization of deferred rent
3,985
(112
)
Amortization of debt issuance costs
1,816
—
Stock-based compensation
3,710
1,838
Provision for doubtful accounts
69
276
Change in fair value of preferred stock warrant liabilities
2,404
79
Other non-operating activities
(400
)
(42
)
Interest paid on capital leases
(171
)
(116
)
Loss on disposals of property and equipment
39
—
Changes in operating assets and liabilities:
Accounts receivable
(3,882
)
(3,375
)
Prepaid expenses and other current assets
(3,209
)
(1,504
)
Other assets
(4,966
)
514
Accounts payable
3,270
(1,389
)
Accrued expenses
287
(39
)
Other liabilities
(910
)
133
Net cash used in operating activities
(15,648
)
(12,584
)
Cash flows from investing activities:
Purchases of marketable securities
(32,662
)
(10,657
)
Sales of marketable securities
47,634
19,927
Purchases of property and equipment
(9,229
)
(9,834
)
Purchases of intangible assets
(636
)
—
Net cash provided by (used in) investing activities
5,107
(564
)
Cash flows from financing activities:
Proceeds from initial public offering, net of underwriting fees
192,510
—
Payments of costs related to initial public offering
(3,653
)
—
Proceeds from borrowings under notes payable
—
4,000
Repayments of notes payable
(4,988
)
—
Repayments of capital leases
(676
)
(585
)
Proceeds from Series F financing
—
39,184
Series F issuance costs
—
(121
)
Proceeds from Employee Stock Purchase Plan
810
—
Proceeds from exercise of vested stock options
2,530
691
Proceeds from early exercise of stock options
520
—
Proceeds from payment of stockholder note
74
20
Repurchase of early exercised shares
—
(13
)
Net cash provided by financing activities
187,127
43,176
Effects of exchange rate changes on cash, cash equivalents, and restricted cash
1
9
Net increase in cash, cash equivalents, and restricted cash
176,587
30,037
Cash, cash equivalents, and restricted cash at beginning of period
36,963
31,396
Cash, cash equivalents, and restricted cash at end of period
$
213,550
$
61,433
See Notes to Condensed Consolidated Financial Statements.
9
FASTLY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—Continued
(in thousands)
(unaudited)
Six months ended June 30,
2019
2018
Supplemental disclosure of cash flow information:
Cash paid for interest
$
4,435
$
938
Cash paid for income taxes, net of refunds received
$
13
$
48
Property and equipment additions not yet paid in cash
$
8,035
$
365
Vesting of early-exercised stock options
$
310
$
81
Capital lease outstanding from current year addition
$
3,740
$
458
Change in other assets from change in accounting principle
$
5,727
$
—
Conversion of convertible preferred stock warrants to convertible common stock warrants
$
5,665
$
—
Costs related to initial public offering, accrued but not yet paid
$
1,945
$
—
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows
Cash and cash equivalents
$
213,463
$
61,433
Restricted cash included in prepaid and other current assets line item of Condensed Consolidated Balance Sheets
87
—
Total cash, cash equivalents, and restricted cash
$
213,550
$
61,433
See Notes to Condensed Consolidated Financial Statements.
10
FASTLY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Nature of Business
Fastly, Inc. has built an edge cloud platform that can process, serve, and secure its customer’s applications as close to their end users as possible. Our edge network spans 64 Points-of-Presence ("POPs") around the world, as of June 30, 2019. We were incorporated in Delaware in 2011 and are headquartered in San Francisco, California.
As used herein, "Fastly," "we," "our," "the Company," and similar terms include Fastly, Inc. and its subsidiaries, unless the context indicates otherwise.
Stock Split
On May 3, 2019, we implemented a 1-for-2 reverse stock split of our stock. All shares of Common Stock, stock-based instruments, and per-share data included in these financial statements give effect to the stock split and the changes in authorized shares have been adjusted retroactively for all periods presented.
Initial Public Offering ("IPO")
On May 21, 2019 we completed an IPO in which we sold 12,937,500 shares of our newly authorized Class A common stock, which included 1,687,500 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at the public offering price of $16.00 per share. We received net proceeds of $192.5 million, after deducting underwriting discounts and commissions, from sales of our shares in the IPO. The net proceeds include additional proceeds of $25.1 million, net of underwriters' discounts and commissions, from the exercise of the underwriters' option to purchase an additional 1,687,500 shares of our Class A common stock. Immediately prior to the completion of the IPO, all shares of common stock then outstanding were reclassified as Class B common stock and all shares of convertible preferred stock then outstanding were converted into 53,630,213 shares of common stock on a one-to-one basis, and then reclassified as shares of Class B common stock.
2. Summary of Significant Accounting Policies
Basis of Presentation
The interim unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") along with instructions to Form 10-Q and Article 10 of Securities and Exchange Commission ("SEC") Regulation S-X.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Unaudited Interim Financial Statements
The accompanying interim condensed consolidated balance sheet as of June 30, 2019, the related interim condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2019 and 2018, the condensed consolidated statements of cash flows, the condensed consolidated statements of convertible preferred stock and stockholders' equity (deficit) for the six months ended June 30, 2019 and 2018, and the related footnote disclosures are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. In management’s opinion, the unaudited financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments necessary for the fair presentation of our financial position as of June 30, 2019, our results of operations and comprehensive income for the three and six months ended June 30, 2019 and 2018, and our statements of cash flows for the six months ended June 30, 2019 and 2018. The results for the three and six months ended June 30, 2019 are not necessarily indicative of the results expected for the full fiscal year or any other periods.
Use of Estimates
The preparation of our condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. Actual
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)
results and outcomes could differ significantly from our estimates, judgments, and assumptions. Significant estimates, judgments, and assumptions used in these financial statements include, but are not limited to, those related to revenue, accounts receivable and related reserves, useful lives and realizability of long-lived assets, income tax reserves, and accounting for stock-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates are reflected in the condensed consolidated financial statements in the period of change and prospectively from the date of the change in estimate.
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash, cash equivalents, marketable securities, and accounts receivable. The primary focus of our investment strategy is to preserve capital and meet liquidity requirements. Our investment policy addresses the level of credit exposure by limiting the concentration in any one corporate issuer or sector and establishing a minimum allowable credit rating. To manage the risk exposure, we invest cash equivalents and marketable securities in a variety of fixed income securities, including government and investment-grade debt securities, and money market funds. We place our cash primarily in checking and money market accounts with reputable financial institutions. Deposits held with these financial institutions may exceed the amount of insurance provided on such deposits, if any.
Concentrations of credit risk with respect to accounts receivable are primarily limited to certain customers to which we make substantial sales. Our customer base consists of a large number of geographically dispersed customers diversified across several industries. To reduce risk, we routinely assess the financial strength of our customers. Based on such assessments, we believe that our accounts receivable credit risk exposure is limited. No customer accounted for more than 10% of revenue for the three and six months ended June 30, 2019 and 2018 or more than 10% of the total accounts receivable balance as of June 30, 2019 and December 31, 2018.
Significant Accounting Policies
There have been no material changes to our significant accounting policies as compared to those described in the Final Prospectus dated May 16, 2019 relating to our IPO, filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Prospectus").
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which amends the existing accounting standards for revenue recognition, Topic 605, and outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP. Among other things ASU 2014-09 requires entities to assess the products or services promised in contracts with customers at contract inception to determine the appropriate unit at which to record revenue, which is referred to as a performance obligation. Revenue is recognized when or as control of the promised products or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those products or services. We have adopted ASU 2014-09 as of January 1, 2019 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2019. Revenues and contract assets or liabilities for contracts completed prior to January 1, 2019 are presented under Topic 605, and revenues and contract assets and liabilities from contracts which were not completed or started after December 31, 2018 are presented under Topic 606. We recorded a net increase in stockholders’ equity (retained earnings) of $5.7 million as of January 1, 2019 due to the cumulative impact of adopting Topic 606 and Topic 340, Other Assets and Deferred Costs. Refer to Note 3, "Revenue", in the Notes to the Condensed Consolidated Financial Statements for further information.
In August 2016, FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"), which clarifies how entities should classify cash receipts and cash payments related to eight specific cash flow matters on the statement of cash flows, with the objective of reducing existing diversity in practice. ASU 2016-15 designates the appropriate class flow classification, including requirements to allocate certain components of these cash receipts and payments among operating, investing, and financing activities. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018. We adopted this guidance effective January 1, 2019 using the retrospective transition approach for all periods presented. The adoption of ASU 2016-15 did not have a material impact on our condensed consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230) ("ASU 2016-18"),which requires companies to include amounts generally described as restricted cash and restricted cash
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—Continued
(unaudited)
equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted this guidance effective January 1, 2019, using the retrospective transition approach for all periods presented. The adoption of ASU 2016-18 did not have a material impact on our condensed consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"), which changes the definition of a business to assist entities with evaluating whether transactions should be accounted for as transfers of assets or business combinations. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018. We adopted this guidance effective January 1, 2019, using the prospective approach. The adoption of ASU 2017-01 did not have a material impact on our condensed consolidated financial statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which eliminates step two from the goodwill impairment test. Under this guidance, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, although ea