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Revenue | 6 Months Ended
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Jun. 30, 2021
Revenue from Contract with Customer [Abstract] |
Revenue | Revenue and Receivables The Company generates revenue primarily through contractual monthly recurring fees received for monitoring and related services provided to customers. In transactions in which the Company provides monitoring and related services but retains ownership of the security system, the Company’s performance obligations primarily include monitoring, related services (such as maintenance agreements), and a material right associated with the one-time non-refundable fees in connection with the initiation of a monitoring contract that the customer will not be required to pay again upon a renewal of the contract (referred to as deferred subscriber acquisition revenue). The portion of the transaction price associated with monitoring and related services revenue is recognized when the services are provided to the customer and is reflected in monitoring and related services revenue in the Condensed Consolidated Statements of Operations. Upon initiation of a monitoring contract, the portion of the transaction price associated with the material right is deferred and recorded as deferred subscriber acquisition revenue in the Condensed Consolidated Balance Sheets. Deferred subscriber acquisition revenue is amortized on a pooled basis into installation and other revenue in the Condensed Consolidated Statements of Operations over the estimated life of the customer relationship using an accelerated method consistent with the related amortization of subscriber system assets and deferred subscriber acquisition costs. Amortization of deferred subscriber acquisition revenue was $41 million and $30 million for the three months ended June 30, 2021 and 2020, respectively, and $78 million and $59 million for the six months ended June 30, 2021 and 2020, respectively. In transactions involving systems sold outright to the customer (referred to as outright sales), the Company’s performance obligations generally include the sale and installation of the system as well as any monitoring and related services. For such arrangements, the Company allocates a portion of the transaction price to each performance obligation based on relative standalone selling price, which is determined using observable internal or external pricing and profitability metrics. The portion of the transaction price associated with the sale and installation of a system is recognized either at a point in time or over time based upon the nature of the transaction and contractual terms and is reflected in installation and other revenue in the Condensed Consolidated Statements of Operations. For revenue recognized over time, progress toward complete satisfaction of the performance obligation is primarily measured using a cost-to-cost measure of progress method. The cost input that drives revenue recognition for contracts where revenue is recognized over time is based primarily on contract cost incurred to date compared to total estimated contract cost. This measure of progress method includes forecasts based on the best information available and reflects the Company’s judgment to faithfully depict the value of the services transferred to the customer. The portion of the transaction price associated with monitoring and related services revenue is recognized when services are provided to the customer and is reflected in monitoring and related services revenue in the Condensed Consolidated Statements of Operations. Revenue from product sales related to systems sold under a customer-owned model was $178 million and $259 million for the three months ended June 30, 2021 and 2020, respectively, and $381 million and $553 million for the six months ended June 30, 2021 and 2020, respectively. Cost of revenue from product sales related to systems sold under a customer-owned model was $147 million and $191 million for the three months ended June 30, 2021 and 2020, respectively, and $307 million and $403 million for the six months ended June 30, 2021 and 2020, respectively. Early termination of the contract by the customer results in a termination charge in accordance with the terms of the contract. Contract termination charges are recognized in revenue when collectability is probable and are reflected in monitoring and related services revenue in the Condensed Consolidated Statements of Operations. The Company records revenue in the Condensed Consolidated Statements of Operations net of sales and other taxes. Amounts collected from customers for sales and other taxes are reported as a liability net of the related amounts remitted. Customer billings for services not yet rendered are deferred and recognized as revenue as services are provided. These fees are recorded as current deferred revenue in the Condensed Consolidated Balance Sheets as the Company expects to satisfy any remaining performance obligations, as well as recognize the related revenue, within the next twelve months. Accordingly, the Company has applied the practical expedient regarding deferred revenue to exclude the value of remaining performance obligations if (i) the contract has an original expected term of one year or less or (ii) the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed. The following table presents the Company’s disaggregated revenue:
|  | Three Months Ended |  | Six Months Ended
(in thousands) |  | June 30, 2021 |  | June 30, 2020 |  | June 30, 2021 |  | June 30, 2020
CSB: |  |  |  |  |  |  |  |
Monitoring and related services |  | $ | 965,233 |  |  | $ | 935,957 |  |  | $ | 1,916,481 |  |  | $ | 1,873,989
Installation and other |  | 57,414 |  |  | 166,229 |  |  | 144,771 |  |  | 339,364
Total CSB |  | 1,022,647 |  |  | 1,102,186 |  |  | 2,061,252 |  |  | 2,213,353
Commercial: |  |  |  |  |  |  |  |
Monitoring and related services |  | 118,287 |  |  | 105,422 |  |  | 229,805 |  |  | 213,347
Installation and other (1) |  | 163,483 |  |  | 123,779 |  |  | 318,064 |  |  | 274,439
Total Commercial |  | 281,770 |  |  | 229,201 |  |  | 547,869 |  |  | 487,786
Total revenue |  | $ | 1,304,417 |  |  | $ | 1,331,387 |  |  | $ | 2,609,121 |  |  | $ | 2,701,139
________________ (1)Approximately half of installation and other revenue generated by the Commercial segment is recognized over time. Revenue Model Initiative and Equipment Ownership Model Change During February 2020, the Company launched a new revenue model initiative for certain residential customers, which (i) revised the amount and nature of fees due at installation, (ii) introduced a 60-month monitoring contract option, and (iii) introduced a new retail installment contract option that allows qualifying residential customers to repay the fees due at installation over a 24-, 36-, or 60-month interest-free period. Due to the requirements of the Company’s initial third-party consumer financing program, the Company also transitioned its security system ownership model from a predominately Company-owned model to a predominately customer-owned model (the “Equipment Ownership Model Change”). During March 2020, the Company entered into an uncommitted receivables securitization financing agreement (the “Receivables Facility”), which allowed the Company to receive financing secured by retail installment contract receivables from transactions under a customer-owned model. During April 2020, the Company amended the Receivables Facility to also permit financing secured by retail installment contract receivables from transactions occurring under a Company-owned model. As a result, the Company began transitioning its security system ownership model to a predominately Company-owned model in May 2020. Refer to Note 6 “Debt” for further discussion regarding the Receivables Facility. Accounts Receivable, net Accounts receivable represent unconditional rights to consideration due from customers in the ordinary course of business and are generally due in one year or less. Accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The allowance for credit losses is recognized at inception and is reassessed each reporting period. The Company’s allowance for credit losses is evaluated on a pooled basis based on customer type. For each pool of customers, the allowance for credit losses is estimated based on the delinquency status of the underlying receivables and the related historical loss experience, as adjusted for current and expected future conditions, if applicable. The allowance for credit losses was not material for the individual pools of customers. The following table presents changes in the allowance for credit losses:
| Six Months Ended June 30,
(in thousands) | 2021 |  | 2020(1)
Beginning balance | $ | 68,342 |  |  | $ | 42,960 |
Provision for credit losses | 25,745 |  |  | 50,506 |
Write-offs, net of recoveries (2) | (31,867) |  |  | (34,425) |
Ending balance | $ | 62,220 |  |  | $ | 59,041 |
________________ (1)Beginning balance reflected is subsequent to the adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instrument, and related amendments (“CECL”) on January 1, 2020, which introduced the current expected credit losses model. The impact was not material. (2)The amount of recoveries was not material for the periods presented, as such, the Company presented write-offs, net of recoveries. Retail Installment Contract Receivables, net During February 2020, the Company introduced a new retail installment contract option that allows qualifying residential customers to pay the fees due at installation over a 24-, 36-, or 60-month interest-free period. The financing component of the Company’s retail installment contract receivables is not significant. Retail installment contracts are available for residential transactions occurring under both Company-owned and customer-owned models. When originating a retail installment contract, the Company utilizes external credit scores to assess credit quality of a customer and to determine eligibility for the retail installment contract. In addition, a customer is required to enroll in the Company’s automated payment process in order to enter into a retail installment contract. Subsequent to origination, the Company monitors the delinquency status of retail installment contract receivables as the key credit quality indicator. As of June 30, 2021, the current and delinquent billed retail installment contract receivables were not material. Retail installment contract receivables are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The allowance for credit losses on retail installment contract receivables is recognized at inception and reassessed each reporting period. As of June 30, 2021 and December 31, 2020, the allowance for credit losses was not material and primarily related to retail installment contract receivables from outright sales transactions. The following table presents unbilled retail installment contract receivables, net, recognized in the Condensed Consolidated Balance Sheets:
(in thousands) |  |  |  |  |  | June 30, 2021 |  | December 31, 2020
Retail installment contract receivables, gross |  |  |  |  |  | $ | 230,517 |  |  | $ | 145,957 |
Allowance for credit losses |  |  |  |  |  | (1,962) |  |  | (4,366) |
Retail installment contract receivables, net |  |  |  |  |  | $ | 228,555 |  |  | $ | 141,591 |
Classification: |  |  |  |  |  |  |  |
Accounts receivable, net |  |  |  |  |  | $ | 68,926 |  |  | $ | 47,023 |
Other assets |  |  |  |  |  | 159,629 |  |  | 94,568 |
Retail installment contract receivables, net |  |  |  |  |  | $ | 228,555 |  |  | $ | 141,591 |
As of June 30, 2021 and December 31, 2020, retail installment contract receivables, net, used as collateral for borrowings under the Receivables Facility were $193 million and $109 million, respectively. Contract Assets, net Contract assets are recorded when the Company has transferred goods or services to the customer in the ordinary course of business but does not have an unconditional right to such consideration. The contract asset is reclassified to accounts receivable as services are performed and billed, which results in the Company’s unconditional right to the consideration. The Company has the right to bill the customer as service is provided over time, which generally occurs over the course of a 24-, 36-, or 60-month period. The financing component of contract assets is not significant. The Company records an allowance for credit losses against its contract assets for expected credit losses that are not expected to be recovered. The allowance for credit losses is recognized at inception and reassessed each reporting period. The allowance for credit losses on contract assets was not material for the periods presented. The following table presents contract assets, net, related primarily to residential transactions recognized in the Condensed Consolidated Balance Sheets:
(in thousands) |  |  |  |  |  | June 30, 2021 |  | December 31, 2020
Contract assets, gross |  |  |  |  |  | $ | 143,683 |  |  | $ | 161,563 |
Allowance for credit losses |  |  |  |  |  | (21,898) |  |  | (29,558) |
Contract assets, net |  |  |  |  |  | $ | 121,785 |  |  | $ | 132,005 |
Classification: |  |  |  |  |  |  |  |
Prepaid expenses and other current assets |  |  |  |  |  | $ | 64,279 |  |  | $ | 59,382 |
Other assets |  |  |  |  |  | 57,506 |  |  | 72,623 |
Contract assets, net |  |  |  |  |  | $ | 121,785 |  |  | $ | 132,005 |
The Company recognized approximately $22 million and $125 million of contract assets during the six months ended June 30, 2021 and 2020, respectively.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=123351226&loc=SL49130554-203045 + Details
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