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Summary of Significant Accounting Policies | 3 Months Ended
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Mar. 31, 2022
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates in Preparation of Financial Statements. The preparation of the accompanying Financial Statements in conformity with U.S. 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 our Financial Statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Reclassifications. Beginning with the second quarter of 2021, we determined that settlement and merchant reserve assets consist of restricted cash and are now included with cash, cash equivalents and restricted cash when reconciling the beginning-of-period and end-of-period total amounts shown on the unaudited Condensed Consolidated Statements of Cash Flows (the “Statements of Cash Flows”). Historically, we presented the change in settlement and merchant reserve assets and liabilities as part of the changes in operating assets and liabilities on the Statements of Cash Flows. Additionally, cash flows related to our settlement and merchant reserve liabilities have been reclassified from cash flows from operating activities to cash flows from financing activities. Prior period amounts have been reclassified to conform to the current period presentation. These changes have no impact on our previously reported consolidated net income, total assets, including cash and cash equivalents, liabilities, and equity. In addition, these changes have no material impact on our previously reported cash flows from operating activities. Revenue. The majority of our future revenue is related to our revenue management solution customer contracts that include variable consideration dependent upon a series of monthly volumes and/or daily usage of services and have contractual terms ending from 2022 through 2028. Our customer contracts may include guaranteed minimums and fixed monthly or annual fees. As of March 31, 2022, our aggregate amount of the transaction price allocated to the remaining performance obligations is approximately $2 billion, which is made up of fixed fee consideration and guaranteed minimums expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied). We expect to recognize approximately 65% of this amount by the end of 2024, with the remaining amount recognized by the end of 2028. We have excluded from this amount variable consideration expected to be recognized in the future related to performance obligations that are unsatisfied. The nature, amount, timing, and uncertainty of our revenue and how revenue and cash flows are affected by economic factors is most appropriately depicted by revenue type, geographic region, and customer vertical. Revenue by type for the quarters ended March 31, 2022 and 2021 were as follows (in thousands):
|  | Quarter Ended |  |
|  | March 31, |  |
|  | 2022 |  |  | 2021 |  |
SaaS and related solutions |  | $ | 234,977 |  |  | $ | 227,019 |  |
Software and services |  |  | 18,436 |  |  |  | 14,779 |  |
Maintenance |  |  | 10,987 |  |  |  | 11,321 |  |
Total revenue |  | $ | 264,400 |  |  | $ | 253,119 |  |
We use the location of the customer as the basis of attributing revenue to geographic regions. Revenue by geographic region for the quarters ended March 31, 2022 and 2021, as a percentage of our total revenue, were as follows:
|  | Quarter Ended |  |
|  | March 31, |  |
|  | 2022 |  |  | 2021 |  |
Americas (principally the U.S.) |  |  | 84 | % |  |  | 86 | % |
Europe, Middle East, and Africa |  |  | 12 | % |  |  | 10 | % |
Asia Pacific |  |  | 4 | % |  |  | 4 | % |
Total revenue |  |  | 100 | % |  |  | 100 | % |
We generate our revenue primarily from the global communications markets; however, we serve an expanding group of customers in other industry markets including retail, healthcare, financial services, insurance, and government entities. Revenue by customer vertical for the quarters ended March 31, 2022 and 2021, as a percentage of our total revenue, were as follows:
|  | Quarter Ended |  |
|  | March 31, |  |
|  | 2022 |  |  | 2021 |  |
Broadband/Cable/Satellite |  |  | 54 | % |  |  | 57 | % |
Telecommunications |  |  | 19 | % |  |  | 18 | % |
Other |  |  | 27 | % |  |  | 25 | % |
Total revenue |  |  | 100 | % |  |  | 100 | % |
Deferred revenue recognized during the quarters ended March 31, 2022 and 2021 was $28.0 million and $20.1 million, respectively. Cash and Cash Equivalents. We consider all highly liquid investments with original maturities of three months or less at the date of the purchase to be cash equivalents. As of March 31, 2022 and December 31, 2021, our cash equivalents consist primarily of institutional money market funds, commercial paper, and time deposits held at major banks. For the cash and cash equivalents denominated in foreign currencies and/or located outside the U.S., we do not anticipate any material amounts being unavailable for use in running our business, but may face limitations on moving cash out of certain foreign jurisdictions due to currency controls and potential negative economic consequences. Restricted Cash. Restricted cash includes cash that is legally or contractually restricted, as well as our settlement and merchant reserve assets. As of March 31, 2022 and December 31, 2021, we had $2.1 million and $1.4 million, respectively, of restricted cash that serves to collateralize outstanding letters of credit included in cash and cash equivalents in our unaudited Condensed Consolidated Balance Sheets (“Balance Sheets” or “Balance Sheet”). Settlement and Merchant Reserve Assets and Liabilities. Settlement assets and liabilities represent cash collected on behalf of customers via payment processing services which is held for an established holding period until settlement with the customer. The holding period is generally one to four business days depending on the payment model, risk profile, and contractual terms with the customer. During the holding period, cash is held in trust with various major financial institutions and a corresponding liability is recorded for the amounts owed to the merchant. At any given time, there may be differences between the cash held in trust and the corresponding liability due to the timing of operating-related cash transfers. Merchant reserves represent deposits collected from customers to mitigate our risk of loss due to nonperformance of settlement obligations initiated by our customers using our payment processing services, or non-payment by customers for services rendered by us. We perform a credit risk evaluation on each customer based on multiple criteria, which provide the basis for the deposit amount required for each customer. For the duration of our relationship with each customer, we hold their reserve deposits with major financial institutions. We hold these funds in separate accounts and are fully offset by corresponding liabilities. The following table summarizes our settlement and merchant reserve assets and liabilities as of the indicated periods (in thousands):
|  | March 31, 2022 |  |  | December 31, 2021 |
|  | Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
Settlement assets/liabilities |  | $ | 148,808 |  |  | $ | 147,445 |  |  | $ | 171,505 |  |  | $ | 170,514 |
Merchant reserve assets/liabilities |  |  | 14,337 |  |  |  | 14,337 |  |  |  | 14,762 |  |  |  | 14,762 |
Total |  | $ | 163,145 |  |  | $ | 161,782 |  |  | $ | 186,267 |  |  | $ | 185,276 |
Financial Instruments. Our financial instruments as of March 31, 2022 and December 31, 2021 include cash and cash equivalents, short-term investments, settlement and merchant reserve assets and liabilities, accounts receivable, accounts payable, and debt. Due to their short maturities, the carrying amounts of cash equivalents, settlement and merchant reserve assets and liabilities, accounts receivable, and accounts payable approximate their fair value. Our short-term investments and certain of our cash equivalents are considered “available-for-sale” and are reported at fair value in our Balance Sheets, with unrealized gains and losses, net of the related income tax effect, excluded from earnings and reported in a separate component of stockholders’ equity. Realized and unrealized gains and losses were not material in any period presented. Primarily all short-term investments held by us as of March 31, 2022 and December 31, 2021 have contractual maturities of less than two years from the time of acquisition. Our short-term investments as of March 31, 2022 and December 31, 2021 consisted almost entirely of fixed income securities. Proceeds from the sale/maturity of short-term investments for the three months ended March 31, 2022 and 2021 were $21.9 million and $29.3 million, respectively, and purchases of short-term investments for the three months ended March 31, 2022 and 2021 were zero and $32.3 million, respectively. Our short-term investments as of March 31, 2022 and December 31, 2021 were $6.1 million and $28.0 million, respectively. The following table represents the fair value hierarchy based upon three levels of inputs, of which Levels 1 and 2 are considered observable and Level 3 is unobservable, for our financial assets measured at fair value (in thousands):
|  | March 31, 2022 |  |  | December 31, 2021 |
|  | Level 1 |  |  | Level 2 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Total |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 12,201 |  |  | $ | — |  |  | $ | 12,201 |  |  | $ | 29,305 |  |  | $ | — |  |  | $ | 29,305 |
Commercial paper |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,000 |  |  |  | 1,000 |
Short-term investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate debt securities |  |  | — |  |  |  | 3,189 |  |  |  | 3,189 |  |  |  | — |  |  |  | 24,352 |  |  |  | 24,352 |
Asset-backed securities |  |  | — |  |  |  | 2,944 |  |  |  | 2,944 |  |  |  | — |  |  |  | 3,685 |  |  |  | 3,685 |
Total |  | $ | 12,201 |  |  | $ | 6,133 |  |  | $ | 18,334 |  |  | $ | 29,305 |  |  | $ | 29,037 |  |  | $ | 58,342 |
Valuation inputs used to measure the fair values of our money market funds were derived from quoted market prices. The fair values of all other financial instruments are based upon pricing provided by third-party pricing services. These prices were derived from observable market inputs. We have chosen not to record our debt at fair value, with changes recognized in earnings each reporting period. The following table indicates the carrying value (par value for convertible notes) and estimated fair value of our debt as of the indicated periods (in thousands):
|  | March 31, 2022 |  |  | December 31, 2021 |
|  | Carrying Value |  |  | Fair Value |  |  | Carrying Value |  |  | Fair Value |
2021 Credit Agreement: |  |  |  |  |  |  |  |  |  |  |  |
Term Loan (carrying value including current maturities) |  | $ | 146,250 |  |  | $ | 146,250 |  |  | $ | 148,125 |  |  | $ | 148,125 |
Revolver |  |  | 245,000 |  |  |  | 245,000 |  |  |  | — |  |  |  | — |
2016 Convertible Notes (par value) |  |  | — |  |  |  | — |  |  |  | 230,000 |  |  |  | 244,950 |
The fair value for our credit agreement was estimated using a discounted cash flow methodology, while the fair value for our convertible notes was estimated based upon quoted market prices or recent sales activity, both of which are considered Level 2 inputs. Accounting Pronouncement Adopted. In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 also amends the related Earnings Per Share guidance. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and can be adopted on either a fully retrospective or modified retrospective basis. On January 1, 2022, we adopted this ASU using the modified retrospective transition method and recorded an approximately $10 million cumulative-effect adjustment to our beginning retained earnings balance.

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