Company Quick10K Filing
LogMeIn
Price72.54 EPS0
Shares50 P/E242
MCap3,619 P/FCF13
Net Debt79 EBIT25
TEV3,698 TEV/EBIT146
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-04-24
10-K 2019-12-31 Filed 2020-02-14
10-Q 2019-09-30 Filed 2019-10-25
10-Q 2019-06-30 Filed 2019-07-26
10-Q 2019-03-31 Filed 2019-04-26
10-K 2018-12-31 Filed 2019-02-21
10-Q 2018-09-30 Filed 2018-10-26
10-Q 2018-06-30 Filed 2018-07-27
10-Q 2018-03-31 Filed 2018-04-27
10-K 2017-12-31 Filed 2018-02-20
10-Q 2017-09-30 Filed 2017-10-27
10-Q 2017-06-30 Filed 2017-07-28
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-03-01
10-Q 2016-09-30 Filed 2016-10-28
10-Q 2016-06-30 Filed 2016-07-27
10-Q 2016-03-31 Filed 2016-04-29
10-K 2015-12-31 Filed 2016-02-19
10-Q 2015-09-30 Filed 2015-10-23
10-Q 2015-06-30 Filed 2015-07-24
10-Q 2015-03-31 Filed 2015-04-29
10-K 2014-12-31 Filed 2015-02-20
10-Q 2014-09-30 Filed 2014-10-24
10-Q 2014-06-30 Filed 2014-07-25
10-Q 2014-03-31 Filed 2014-04-30
10-K 2013-12-31 Filed 2014-03-10
10-Q 2013-09-30 Filed 2013-10-25
10-Q 2013-06-30 Filed 2013-07-26
10-Q 2013-03-31 Filed 2013-04-26
10-K 2012-12-31 Filed 2013-02-22
10-Q 2012-09-30 Filed 2012-10-25
10-Q 2012-06-30 Filed 2012-07-26
10-Q 2012-03-31 Filed 2012-04-26
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-09-30 Filed 2011-10-27
10-Q 2011-06-30 Filed 2011-07-28
10-Q 2011-03-31 Filed 2011-04-28
10-K 2010-12-31 Filed 2011-02-28
10-Q 2010-09-30 Filed 2010-10-28
10-Q 2010-06-30 Filed 2010-07-29
10-Q 2010-03-31 Filed 2010-04-29
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-06-15
8-K 2020-06-11
8-K 2020-04-23
8-K 2020-03-23
8-K 2020-03-12
8-K 2020-03-02
8-K 2020-02-07
8-K 2020-02-03
8-K 2020-01-07
8-K 2019-12-17
8-K 2019-10-24
8-K 2019-07-25
8-K 2019-05-30
8-K 2019-04-25
8-K 2019-02-11
8-K 2018-11-13
8-K 2018-11-05
8-K 2018-10-25
8-K 2018-07-24
8-K 2018-05-31
8-K 2018-04-26
8-K 2018-04-03
8-K 2018-04-02
8-K 2018-03-20
8-K 2018-02-27
8-K 2018-02-15
8-K 2018-02-07
8-K 2018-02-01

LOGM 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 logm-ex101_48.htm
EX-31.1 logm-ex311_9.htm
EX-31.2 logm-ex312_8.htm
EX-32.1 logm-ex321_6.htm
EX-32.2 logm-ex322_7.htm

LogMeIn Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
4.13.32.51.60.80.02012201420172020
Assets, Equity
0.40.30.20.10.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

logm-10q_20200331.htm
false 2020 Q1 0001420302 --12-31 Large Accelerated Filer P2Y 0.3333 0.3333 0.3333 2020 P2Y P3Y P3Y P3Y P3Y P4Y 0.3333 0.3333 0.3333 P5Y4M24D P5Y10M24D P5Y9M18D P5Y9M18D P1Y6M P6M 0001420302 2020-01-01 2020-03-31 xbrli:shares 0001420302 2020-04-20 iso4217:USD 0001420302 2019-12-31 0001420302 2020-03-31 iso4217:USD xbrli:shares 0001420302 2019-01-01 2019-03-31 0001420302 us-gaap:CommonStockMember 2018-12-31 0001420302 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001420302 us-gaap:RetainedEarningsMember 2018-12-31 0001420302 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001420302 us-gaap:TreasuryStockMember 2018-12-31 0001420302 2018-12-31 0001420302 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001420302 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001420302 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0001420302 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001420302 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 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: 001-34391

 

LOGMEIN, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-1515952

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

320 Summer Street

Boston, Massachusetts

 

02210

(Address of principal executive offices)

 

(Zip Code)

 

781-638-9050

(Registrant’s telephone number, including area code)

(Former name, former address and 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

Common Stock, $0.01 par value per share

LOGM

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      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 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 April 20, 2020, there were 48,770,832 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

 

 

 

 


LOGMEIN, INC.

INDEX

 

 

 

PAGE
NUMBER

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

ITEM 1: Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets as of December 31, 2019 and March 31, 2020

 

3

Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2020

 

4

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2019 and 2020

 

5

Condensed Consolidated Statements of Equity for the three months ended March 31, 2019 and 2020

 

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2020

 

7

Notes to Condensed Consolidated Financial Statements

 

8

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk

 

34

ITEM 4: Controls and Procedures

 

35

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

ITEM 1: Legal Proceedings

 

36

ITEM 1A: Risk Factors

 

37

ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds

 

52

ITEM 6: Exhibits

 

53

Signatures

 

54

 

2


LogMeIn, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

 

 

 

December 31,

2019

 

 

March 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

128,005

 

 

$

189,550

 

Accounts receivable (net of allowances of $3,744 and $4,245 as of

   December 31, 2019 and March 31, 2020, respectively)

 

 

107,595

 

 

 

106,541

 

Prepaid expenses and other current assets

 

 

89,351

 

 

 

104,283

 

Total current assets

 

 

324,951

 

 

 

400,374

 

Property and equipment, net

 

 

99,157

 

 

 

98,449

 

Operating lease assets

 

 

99,026

 

 

 

99,067

 

Restricted cash

 

 

1,883

 

 

 

1,808

 

Intangibles, net

 

 

840,427

 

 

 

787,091

 

Goodwill

 

 

2,414,287

 

 

 

2,413,611

 

Other assets

 

 

68,272

 

 

 

71,435

 

Deferred tax assets

 

 

7,994

 

 

 

8,364

 

Total assets

 

$

3,855,997

 

 

$

3,880,199

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

52,104

 

 

$

45,478

 

Current operating lease liabilities

 

 

18,470

 

 

 

18,979

 

Accrued liabilities

 

 

161,996

 

 

 

158,465

 

Deferred revenue, current portion

 

 

390,087

 

 

 

437,266

 

Total current liabilities

 

 

622,657

 

 

 

660,188

 

Long-term debt

 

 

200,000

 

 

 

200,000

 

Deferred revenue, net of current portion

 

 

18,076

 

 

 

13,992

 

Deferred tax liabilities

 

 

170,482

 

 

 

161,200

 

Non-current operating lease liabilities

 

 

88,674

 

 

 

88,735

 

Other long-term liabilities

 

 

15,400

 

 

 

15,878

 

Total liabilities

 

 

1,115,289

 

 

 

1,139,993

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value — 5,000 shares authorized, 0 shares

   outstanding as of December 31, 2019 and March 31, 2020

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value—145,000 shares authorized; 57,294 and

   57,340 shares issued; and 48,573 and 48,619 outstanding as of

   December 31, 2019 and March 31, 2020, respectively

 

 

573

 

 

 

573

 

Additional paid-in capital

 

 

3,369,893

 

 

 

3,384,902

 

Retained earnings (accumulated deficit)

 

 

4,931

 

 

 

(6,354

)

Accumulated other comprehensive income (loss)

 

 

684

 

 

 

(3,542

)

Treasury stock, at cost - 8,721 shares

 

 

(635,373

)

 

 

(635,373

)

Total equity

 

 

2,740,708

 

 

 

2,740,206

 

Total liabilities and equity

 

$

3,855,997

 

 

$

3,880,199

 

 

See notes to condensed consolidated financial statements.

 

3


LogMeIn, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2020

 

Revenue

 

$

307,700

 

 

$

322,383

 

Cost of revenue

 

 

77,688

 

 

 

84,878

 

Gross profit

 

 

230,012

 

 

 

237,505

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

40,717

 

 

 

39,879

 

Sales and marketing

 

 

114,634

 

 

 

126,210

 

General and administrative

 

 

33,886

 

 

 

33,699

 

Restructuring charge

 

 

8,474

 

 

 

18,541

 

Amortization of acquired intangibles

 

 

39,499

 

 

 

33,328

 

Total operating expenses

 

 

237,210

 

 

 

251,657

 

Income (loss) from operations

 

 

(7,198

)

 

 

(14,152

)

Interest income

 

 

661

 

 

 

267

 

Interest expense

 

 

(2,143

)

 

 

(1,680

)

Other income (expense), net

 

 

(260

)

 

 

439

 

Income (loss) before income taxes

 

 

(8,940

)

 

 

(15,126

)

(Provision for) benefit from income taxes

 

 

(99

)

 

 

3,841

 

Net income (loss)

 

$

(9,039

)

 

$

(11,285

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.18

)

 

$

(0.23

)

Diluted

 

$

(0.18

)

 

$

(0.23

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

50,639

 

 

 

48,600

 

Diluted

 

 

50,639

 

 

 

48,600

 

Cash dividends declared and paid per share:

 

$

0.325

 

 

$

 

 

See notes to condensed consolidated financial statements.

 

4


LogMeIn, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2020

 

Net income (loss)

 

$

(9,039

)

 

$

(11,285

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

Net translation gains (losses)

 

 

(2,625

)

 

 

(4,226

)

Comprehensive income (loss)

 

$

(11,664

)

 

$

(15,511

)

 

See notes to condensed consolidated financial statements.

5


LogMeIn, Inc.

Condensed Consolidated Statements of Equity

(In thousands)

 

 

 

Three Months Ended March 31, 2019

 

 

 

Common Stock

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Earnings

(accumulated

deficit)

 

 

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

 

 

Total

Equity

 

Balance at January 1, 2019

 

 

50,692

 

 

$

567

 

 

$

3,316,603

 

 

$

84,043

 

 

$

2,133

 

 

$

(428,658

)

 

$

2,974,688

 

Issuance of common stock upon exercise of stock options

 

 

1

 

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

 

 

 

41

 

Net issuance of common stock upon vesting of restricted

   stock units

 

 

187

 

 

 

2

 

 

 

(8,813

)

 

 

 

 

 

 

 

 

 

 

 

(8,811

)

Stock-based compensation

 

 

 

 

 

 

 

 

15,031

 

 

 

 

 

 

 

 

 

 

 

 

15,031

 

Treasury stock

 

 

(714

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(57,832

)

 

 

(57,832

)

Dividends on common stock

 

 

 

 

 

 

 

 

 

 

 

(16,517

)

 

 

 

 

 

 

 

 

(16,517

)

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(9,039

)

 

 

 

 

 

 

 

 

(9,039

)

Cumulative translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,625

)

 

 

 

 

 

(2,625

)

Balance at March 31, 2019

 

 

50,166

 

 

$

569

 

 

$

3,322,862

 

 

$

58,487

 

 

$

(492

)

 

$

(486,490

)

 

$

2,894,936

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

Common Stock

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Earnings

(accumulated

deficit)

 

 

Other

Comprehensive

Income (Loss)

 

 

Treasury

Stock

 

 

Total

Equity

 

Balance at January 1, 2020

 

 

48,573

 

 

$

573

 

 

$

3,369,893

 

 

$

4,931

 

 

$

684

 

 

$

(635,373

)

 

$

2,740,708

 

Issuance of common stock upon exercise of stock options

 

 

4

 

 

 

 

 

 

85

 

 

 

 

 

 

 

 

 

 

 

 

85

 

Net issuance of common stock upon vesting of restricted

   stock units

 

 

42

 

 

 

 

 

 

(1,937

)

 

 

 

 

 

 

 

 

 

 

 

(1,937

)

Stock-based compensation

 

 

 

 

 

 

 

 

16,861

 

 

 

 

 

 

 

 

 

 

 

 

16,861

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

(11,285

)

 

 

 

 

 

 

 

 

(11,285

)

Cumulative translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,226

)

 

 

 

 

 

(4,226

)

Balance at March 31, 2020

 

 

48,619

 

 

$

573

 

 

$

3,384,902

 

 

$

(6,354

)

 

$

(3,542

)

 

$

(635,373

)

 

$

2,740,206

 

 

See notes to condensed consolidated financial statements.

 

6


LogMeIn, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(9,039

)

 

$

(11,285

)

Adjustments to reconcile net income (loss) to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

15,031

 

 

 

16,861

 

Depreciation and amortization

 

 

75,944

 

 

 

69,245

 

Benefit from deferred income taxes

 

 

(11,651

)

 

 

(9,781

)

Other, net

 

 

337

 

 

 

521

 

Changes in assets and liabilities, excluding effect of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

6,024

 

 

 

(986

)

Prepaid expenses and other current assets

 

 

2,883

 

 

 

(16,547

)

Other assets

 

 

(6,674

)

 

 

(4,262

)

Accounts payable

 

 

9,344

 

 

 

(8,605

)

Accrued liabilities

 

 

19,350

 

 

 

3,603

 

Deferred revenue

 

 

23,820

 

 

 

48,526

 

Other long-term liabilities

 

 

(5,719

)

 

 

709

 

Net cash provided by (used in) operating activities

 

 

119,650

 

 

 

87,999

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(12,187

)

 

 

(8,401

)

Intangible asset additions

 

 

(8,915

)

 

 

(10,319

)

Cash paid for acquisitions, net of cash acquired

 

 

(22,463

)

 

 

 

Net cash provided by (used in) investing activities

 

 

(43,565

)

 

 

(18,720

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock upon option exercises

 

 

41

 

 

 

85

 

Payments of withholding taxes in connection with restricted stock unit vesting

 

 

(7,789

)

 

 

(1,937

)

Payment of contingent consideration

 

 

 

 

 

(1,294

)

Dividends paid on common stock

 

 

(16,517

)

 

 

 

Purchase of treasury stock

 

 

(54,067

)

 

 

 

Net cash provided by (used in) financing activities

 

 

(78,332

)

 

 

(3,146

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(1,385

)

 

 

(4,663

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(3,632

)

 

 

61,470

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

150,492

 

 

 

129,888

 

Cash, cash equivalents and restricted cash, end of period

 

$

146,860

 

 

$

191,358

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,906

 

 

$

2,705

 

Cash paid (refunds received) from income taxes

 

$

(313

)

 

$

19,457

 

Noncash investing and financing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and

   accrued liabilities

 

$

7,704

 

 

$

7,907

 

Withholding taxes in connection with restricted stock unit vesting in accrued liabilities

 

$

1,023

 

 

$

 

Purchases of treasury stock included in accrued liabilities

 

$

5,554

 

 

$

 

Fair value of contingent consideration in connection with acquisition,

   included in accrued liabilities

 

$

3,170

 

 

$

 

Lease assets obtained (relieved) and related operating lease liabilities

 

$

(3,503

)

 

$

5,849

 

See notes to condensed consolidated financial statements.

7


LogMeIn, Inc.

Notes to Condensed Consolidated Financial Statements

1. Nature of the Business

LogMeIn, Inc., which is referred to herein as LogMeIn or the Company, provides a portfolio of cloud-based unified communications and collaboration, identity and access management, and customer engagement and support solutions designed to simplify how people connect with each other and the world around them to drive meaningful interactions, deepen relationships, and create better outcomes for individuals and businesses. The Company is headquartered in Boston, Massachusetts with additional locations in North America, South America, Europe, Asia and Australia.

In December 2019, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, with Logan Parent, LLC, or Parent, and Logan Merger Sub, Inc., a wholly owned subsidiary of Parent, or Merger Sub. Pursuant to the terms of the Merger Agreement, Merger Sub would merge with and into LogMeIn, which the Company refers to herein as the Merger. Parent and Merger Sub are controlled by Francisco Partners, a technology-focused global private equity firm, and Evergreen Coast Capital Corp., the technology-focused global private equity affiliate of Elliott Management Corporation, an investment management firm. Assuming the satisfaction of the remaining outstanding conditions set forth in the Merger Agreement, the Merger is currently expected to close in mid-2020. The Company recorded $2.3 million in general and administrative expense for Merger-related costs during the three months ended March 31, 2020.

The Company is closely monitoring the impact of the 2019 novel coronavirus, or COVID-19, on all aspects of its business. COVID-19 was declared a global pandemic by the World Health Organization on March 11, 2020 and the President of the United States declared the COVID-19 outbreak a national emergency. While the COVID-19 pandemic has not had a material adverse impact on the Company’s operations to date, the future impacts of the pandemic and any resulting economic impact are largely unknown and rapidly evolving. It is possible that the COVID-19 pandemic, the measures taken by the governments of countries affected and the resulting economic impact may materially and adversely affect the Company’s results of operations, cash flows and financial position as well as its customers. The impact of the COVID-19 pandemic may also exacerbate other risks discussed in this Quarterly Report on Form 10-Q. Refer to Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q for a complete description of the material risks that the Company currently faces.

 

2. Summary of Significant Accounting Policies

Principles of Consolidation — The accompanying condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company has prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP.

Unaudited Interim Condensed Consolidated Financial Statements — The accompanying condensed consolidated financial statements and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited and have been prepared in accordance with GAAP and applicable rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read along with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 14, 2020. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management, reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The results for the interim periods presented are not necessarily indicative of future results. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

Use of Estimates — The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates.

 

8


Revenue Recognition — The Company derives its revenue primarily from subscription fees for its premium subscription software services, usage fees from audio services, and, to a lesser extent, the sale or lease of telecommunications equipment. Revenue is reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transaction including mandatory government charges that are passed through to the Company’s customers. Revenue is recognized when control of these services or products are transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the contract’s performance obligations.

The Company determines revenue recognition through the following five steps:

 

Identification of the contract, or contracts, with a customer

 

Identification of the performance obligations in the contract

 

Determination of the transaction price

 

Allocation of the transaction price to the performance obligations in the contract

 

Recognition of revenue when, or as, performance obligations are satisfied

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Disaggregated Revenue — The Company disaggregates revenue from contracts with customers by geography and product grouping, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

The Company’s revenue by geography (based on customer address) is as follows:

 

 

 

Three Months Ended

March 31,

 

 

 

2019

 

 

2020

 

 

 

(In thousands)

 

Revenues:

 

 

 

 

 

 

 

 

United States

 

$

241,294

 

 

$

252,947

 

International

 

 

66,406

 

 

 

69,436

 

Total revenue

 

$

307,700

 

 

$

322,383