16 unchanged sentences
generally accepted accounting principles.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2021 expressed an unqualified opinion thereon.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
9 unchanged sentences
We believe that our audits provide a reasonable basis for our opinion.
−Removed: Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:
−Removed: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
−Removed: The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
+Added: Critical Audit Matter
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:
+Added: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
+Added: The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Revenue Recognition
14 unchanged sentences
To test the Company’s revenue, our audit procedures included, among other procedures, performing data analytics by extracting data from the Company’s systems to evaluate the completeness and accuracy of recorded revenues, testing a sample of revenue transactions, which included evaluating the transaction price based on inspection of customer contracts and approved rate tables, as well as testing the mathematical accuracy of the recorded revenue based on the voice and messaging usage, as well as the quantity of phone numbers in service and quantity of phone numbers with emergency services access during the period.
−Removed: Business Combination
−Removed: Description of the
−Removed: Matter As explained in Note 3 to the consolidated financial statements, on November 2, 2020 the Company completed the acquisition of Voice Topco Limited (“Voxbone”) for total estimated purchase consideration of $519.4 million.
−Removed: The acquisition was accounted for as a business combination.
−Removed: The Company recorded intangible assets from this acquisition, including customer relationships and developed technology of $148.5 million and $84.1 million, respectively.
−Removed: The Company used the multi-period excess earning method to estimate the preliminary fair value of the customer relationships and the relief from royalty method to estimate the preliminary fair value of the developed technology, each of which are based on management’s estimates and assumptions.
−Removed: Auditing the Company's accounting for its acquisition of Voxbone was complex and subjective due to the significant estimation uncertainty in determining the fair value of the above identified intangible assets, which was primarily due to the sensitivity of the respective fair values to the underlying assumptions.
−Removed: The fair value estimate of the customer relationships intangible asset included significant assumptions in the prospective financial information (including revenue growth) and the discount rate.
−Removed: The fair value estimate of the developed technology intangible asset included significant assumptions in the prospective financial information (including revenue growth and royalty rate) and the discount rate.
−Removed: These significant assumptions for each of the identified intangible assets are forward-looking and could be affected by future economic and market conditions.
−Removed: How We Addressed
−Removed: the Matter in Our
−Removed: Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the accounting for the acquisition.
−Removed: Our tests included controls over the estimation process and models to estimate the fair values of the above identified intangible assets, as well as controls over management’s review of the valuation methodologies and significant assumptions discussed above.
−Removed: To test the estimated fair values of the customer relationship and developed technology intangible assets, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodologies, testing the significant assumptions, and testing the completeness and accuracy of the underlying data.
−Removed: For example, we compared the significant assumptions in the prospective financial information, including the forecasted revenue growth rates, to current industry trends, as well as to the historical performance of the acquired business.
−Removed: With the assistance of our valuation specialists, we evaluated the valuation methodologies, and significant assumptions, including royalty rate and discount rates.
−Removed: This included understanding and validating the source information underlying the determination of the royalty rate and discount rates and testing the mathematical accuracy of the calculations.
−Removed: In addition, we developed a range of independent estimates for the discount rates using publicly available market data for comparable entities and comparing those to the discount rates selected by management.
−Removed: /s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
+Added: /s/ Ernst & Young LLP
Raleigh, North Carolina
−Removed: March 1, 2021
+Added: February 25, 2022
Report of Independent Registered Public Accounting Firm
4 unchanged sentences
(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
−Removed: As indicated in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Voice Topco Limited (“Voxbone”) which was acquired on November 2, 2020, which is included in the 2020 consolidated financial statements of the Company and constituted 3% of total assets as of December 31, 2020, and 5% of total revenue for the year then ended.
−Removed: Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Voxbone.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated March 1, 2021 expressed an unqualified opinion thereon.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 25, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
16 unchanged sentences
Raleigh, North Carolina
−Removed: March 1, 2021
+Added: February 25, 2022
BANDWIDTH INC.
7 unchanged sentences
Accounts receivable, net of allowance for doubtful accounts 55,243 61,572
−Removed: Prepaid expenses and other current assets 9,260 14,508
Deferred costs 2,411 3,204
+Added: Prepaid expenses and other current assets 14,508 15,820
Total current assets 193,599 412,885
−Removed: Property and equipment, net 41,654 51,645
+Added: Property, plant and equipment, net 51,645 69,604
Operating right-of-use asset, net 19,491 14,061
3 unchanged sentences
Goodwill 372,239 344,423
−Removed: Deferred tax asset, net 34,861 —
Total assets $ 890,608 $ 1,065,539
28 unchanged sentences
Accumulated deficit ( 49,505 ) ( 76,867 )
−Removed: Accumulated other comprehensive income 41 27,941
+Added: Accumulated other comprehensive income (loss) 27,941 ( 13,040 )
Total stockholders’ equity 429,923 412,595
Total liabilities and stockholders’ equity $ 890,608 $ 1,065,539
−Removed: See accompany notes.
+Added: See accompanying notes.
BANDWIDTH INC.
16 unchanged sentences
Total operating expenses 125,328 171,366 220,760
−Removed: Operating income (loss) 6,752 ( 17,693 ) ( 13,505 )
+Added: Operating loss ( 17,693 ) ( 13,505 ) ( 2,237 )
Other income (expense), net:
1 unchanged sentence
Other income (expense), net 23 ( 1,795 ) ( 174 )
−Removed: Total other income (expense) 301 2,469 ( 15,467 )
−Removed: Income (loss) before income taxes 7,053 ( 15,224 ) ( 28,972 )
+Added: Total other income (expense), net 2,469 ( 15,467 ) ( 28,958 )
+Added: Loss before income taxes ( 15,224 ) ( 28,972 ) ( 31,195 )
Income tax benefit (provision) 17,718 ( 15,005 ) 3,833
14 unchanged sentences
Net income (loss) $ 2,494 $ ( 43,977 ) $ ( 27,362 )
−Removed: Other comprehensive (loss) income
−Removed: Unrealized (loss) gain on marketable securities, net ( 1 ) 1 —
+Added: Other comprehensive income (loss)
+Added: Unrealized gain on marketable securities, net 1 — —
Foreign currency translation, net of income taxes 41 27,900 ( 41,150 )
−Removed: Total other comprehensive (loss) income ( 1 ) 42 27,900
+Added: Unrealized gain on employee benefit plan, net of income taxes — — 169
+Added: Total other comprehensive income (loss) 42 27,900 ( 40,981 )
Total comprehensive income (loss) $ 2,536 $ ( 16,077 ) $ ( 68,343 )
8 unchanged sentences
Balance at December 31, 2018 12,912,747 $ 13 6,510,732 $ 6 $ 116,600 $ ( 1 ) $ ( 7,848 ) $ 108,770
+Added: Issuance of common stock in connection with follow on public offering, net of underwriting discounts 2,875,000 3 — — 147,388 — — 147,391
+Added: Costs in connection with public offering — — — — ( 834 ) — — ( 834 )
Exercises of vested stock options 1,075,482 1 — — 7,356 — — 7,357
Vesting of restricted stock units 163,944 — — — — — — —
−Removed: Exercise of warrants to purchase common stock 48,904 — — — 37 — — 37
+Added: Equity awards withheld for tax liability ( 26,026 ) — — — ( 1,583 ) — — ( 1,583 )
Conversion of Class B voting common stock to Class A voting common stock 1,583,331 2 ( 1,583,331 ) ( 1 ) — — — 1
−Removed: Issuance of Class A voting common stock 330 — — — 11 — — 11
−Removed: Costs in connection with initial public offering — — — — ( 285 ) — — ( 285 )
−Removed: Unrealized loss on marketable securities — — — — — ( 1 ) — ( 1 )
+Added: Adjustment to opening retained earnings due to adoption of ASC 606 — — — — — — ( 174 ) ( 174 )
+Added: Unrealized gain on marketable securities — — — — — 1 — 1
+Added: Foreign currency translation — — — — — 41 — 41
Stock based compensation — — — — 6,626 — — 6,626
1 unchanged sentence
Balance at December 31, 2019 18,584,478 19 4,927,401 5 275,553 41 ( 5,528 ) 270,090
−Removed: Issuance of common stock in connection with follow on public offering, net of underwriting discounts 2,875,000 3 — — 147,388 — — 147,391
−Removed: Costs in connection with public offering — — — — ( 834 ) — — ( 834 )
+Added: Issuance of debt conversion option — — — — 104,553 — — 104,553
+Added: Debt conversion option issuance costs, net of tax — — — — ( 3,742 ) — — ( 3,742 )
+Added: Capped call option purchase price — — — — ( 43,320 ) — — ( 43,320 )
Exercises of vested stock options 593,084 1 — — 4,075 — — 4,076
2 unchanged sentences
Conversion of Class B voting common stock to Class A voting common stock 2,431,276 1 ( 2,431,276 ) ( 3 ) — — — ( 2 )
−Removed: Adjustment to opening retained earnings due to adoption of ASC 606 — — — — — — ( 174 ) ( 174 )
−Removed: Unrealized gain on marketable securities — — — — — 1 — 1
+Added: Equity consideration for Voxbone acquisition 663,394 1 — — 106,379 — — 106,380
Foreign currency translation — — — — — 27,900 — 27,900
Stock based compensation — — — — 9,881 — — 9,881
−Removed: Net income — — — — — — 2,494 2,494
+Added: Net loss — — — — — — ( 43,977 ) ( 43,977 )
Balance at December 31, 2020 22,413,004 22 2,496,125 2 451,463 27,941 ( 49,505 ) 429,923
13 unchanged sentences
Shares Amount Shares Amount
−Removed: Equity consideration for Voxbone acquisition 663,394 1 — — 106,379 — — 106,380
Foreign currency translation — — — — — ( 41,150 ) — ( 41,150 )
+Added: Unrealized gain on employee benefit pension plan — — — — — 169 — 169
Stock based compensation — — — — 14,537 — — 14,537
9 unchanged sentences
Net income (loss) $ 2,494 $ ( 43,977 ) $ ( 27,362 )
−Removed: Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
+Added: Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities
Depreciation and amortization 9,538 16,803 36,642
7 unchanged sentences
Changes in operating assets and liabilities:
−Removed: Accounts receivable, net of allowances ( 2,784 ) ( 6,178 ) ( 18,832 )
+Added: Accounts receivable ( 6,178 ) ( 18,832 ) ( 6,711 )
Prepaid expenses and other assets ( 4,245 ) ( 3,823 ) ( 6,751 )
−Removed: Deferred costs 243 ( 69 ) ( 1,565 )
Accounts payable 1,145 315 1,992
Accrued expenses and other liabilities 6,028 14,393 9,693
−Removed: Deferred revenue and advanced billings 6,019 554 2,845
Operating right-of-use liability ( 3,357 ) ( 5,301 ) ( 6,227 )
−Removed: Deferred rent 2,080 — —
−Removed: Net cash provided by (used in) operating activities 24,633 ( 1,253 ) 4,518
+Added: Net cash (used in) provided by operating activities ( 1,253 ) 4,518 40,803
Cash flows from investing activities
1 unchanged sentence
Capitalized software development costs ( 3,544 ) ( 2,319 ) ( 3,926 )
+Added: Purchase of land — — ( 30,017 )
+Added: Proceeds from sale of land — — 17,462
Purchase of marketable securities ( 68,361 ) — —
3 unchanged sentences
Acquisition, net of cash acquired — ( 400,493 ) —
−Removed: Net cash used in investing activities ( 31,683 ) ( 7,653 ) ( 455,085 )
+Added: Net cash (used in) provided by investing activities ( 7,653 ) ( 455,085 ) 2,833
Cash flows from financing activities
Payments on finance leases — ( 28 ) ( 212 )
−Removed: Payment of costs related to the initial public offering ( 285 ) — —
Proceeds from the follow-on public offering, net of underwriting discounts 147,391 — —
1 unchanged sentence
Proceeds from issuance of convertible senior notes — 400,000 250,000
−Removed: Payment of debt issuance costs ( 25 ) ( 167 ) ( 11,990 )
Purchase of capped call — ( 43,320 ) ( 25,500 )
+Added: Payment of Acquisition holdback — — ( 6,689 )
+Added: Payment of debt issuance costs ( 167 ) ( 11,990 ) ( 7,544 )
Proceeds from exercises of stock options 7,357 4,073 926
−Removed: Proceeds from exercises of warrants 37 — —
Value of equity awards withheld for tax liabilities ( 1,406 ) ( 1,844 ) ( 3,954 )
Net cash provided by financing activities 152,418 346,891 207,027
−Removed: BANDWIDTH INC.
−Removed: Consolidated Statements of Cash Flows
−Removed: (In thousands)
Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 9 ) 109 189
2 unchanged sentences
Cash, cash equivalents, and restricted cash, end of period $ 185,004 $ 81,437 $ 332,289
+Added: BANDWIDTH INC.
+Added: Consolidated Statements of Cash Flows
+Added: (In thousands)
Supplemental disclosure of cash flow information
Cash paid for interest $ 341 $ 579 $ 1,476
−Removed: Cash paid (refunded) for taxes $ 155 $ ( 178 ) $ 454
+Added: Cash (refunded) paid for taxes $ ( 178 ) $ 454 $ 1,999
Right-of-use assets obtained in exchange for new operating lease liabilities $ 4,528 $ 3,105 $ 526
2 unchanged sentences
Purchase of property and equipment, accrued but not paid $ 1,375 $ 6,043 $ 3,760
+Added: Lease incentive $ — $ — $ 4,677
Value of common stock issued in acquisition $ — $ 106,379 $ —
5 unchanged sentences
Notes to Consolidated Financial Statements
−Removed: (In thousands, except share and per share amounts)
Organization and Description of Business
8 unchanged sentences
The Other segment also includes revenue from traffic generated by other carriers, SMS registration fees and other miscellaneous product lines.
−Removed: On November 2, 2020, Bandwidth completed the acquisition (the “Business Combination” or the “Transaction”) of Voxbone S.A., a private limited liability company registered under the laws of Belgium, pursuant to the Share Purchase Agreement (“SPA”) dated as of October 12, 2020, in which Bandwidth agreed to acquire all of the A Ordinary Shares, B Ordinary Shares and C Ordinary Shares of Voice Topco Limited (“Voice Topco”).
−Removed: Voice Topco directly or indirectly held all of the issued and outstanding shares of Voxbone, S.A., which is the operating subsidiary of Voice Topco.
−Removed: Voice Topco and its subsidiaries are collectively referred to “Voxbone” herein.
−Removed: Upon closing of the Transaction, Bandwidth paid cash consideration in Euros equivalent to $ 413,005 in US dollars, which included a holdback amount of $ 8,153 (the “Holdback”), and issued 663,394 Class A common shares at $ 160.355 per share for the purchase of Voxbone.
−Removed: Bandwidth’s management has concluded that the acquired assets and assumed liabilities of Voxbone, together with acquired processes and employees, represent a business as defined in the Financial Accounting Standards Board's (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations.
−Removed: Accordingly, the Transaction has been accounted for as a Business Combination, with Voxbone as a wholly owned subsidiary of Bandwidth.
−Removed: See Note 3, “ Business Combination ” to these consolidated financial statements, for additional details.
Summary of Significant Accounting Policies
8 unchanged sentences
All intercompany accounts and transactions have been eliminated in consolidation.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
Use of Estimates
1 unchanged sentence
These estimates in the consolidated financial statements include, but are not limited to, allowance for doubtful accounts, reserve for expected credit losses, reserve for sales credits, recoverability of long lived and intangible assets, fair value of acquired intangible assets and goodwill, discount rates used in the valuation of right-of-use assets and lease liabilities, the fair value of the liability and equity components of the Company’s Convertible Notes (as defined herein), estimated period of benefit, valuation allowances on deferred tax assets, certain accrued expenses and contingencies, economic and demographic actuarial assumptions related to pension and other postretirement benefit costs and liabilities, estimated cash flows on asset retirement obligation.
−Removed: Although the Company believes that the estimates it uses are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: the Company believes that the estimates it uses are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates.
Effective January 1, 2020, due to the continued growth in customers and low churn rates, the Company updated its calculation of the estimated period of benefit for nonrefundable upfront fees from 3 to 4 years.
−Removed: For the year ended December 31, 2020 the Company reduced total revenue by approximately $ 1,632 and reduced cost of revenue by approximately $ 859 , related to the change in the estimated period of benefit.
Effective July 1, 2020, due to significant investment in software during the first half of 2020 and management's expectation that such investment would yield benefit for a longer period of time, the Company updated its estimated useful life for internal-use software development from 3 to 4 years.
−Removed: For the year ended December 31, 2020, the Company reduced cost of revenue by $ 314 and general and administrative expense by $ 104 .
Revenue Recognition
−Removed: Adoption of Accounting Standards Codification ( “ ASC ” ) 606, “ Revenue from Contracts with Customers ”
−Removed: On January 1, 2019, the Company adopted the guidance of ASC 606, Revenue from Contracts with Customers, using the modified retrospective method applied to those contracts which were not completed as of January 1, 2019.
−Removed: The Company ’ s results for reporting periods beginning after January 1, 2019 are presented in accordance with the provisions under ASC 606 and prior period amounts have not been adjusted and continue to be reported in accordance with the Company ’ s revenue recognition policy as further described in Note 2, Summary of Significant Accounting Policies, to its Annual Report on Form 10-K for the year ended December 31, 2018.
−Removed: In connection with the adoption of ASC 606, the Company recognized a net increase to its opening accumulated deficit of $ 174 as of January 1, 2019, related to a discount present in one of its contracts.
−Removed: Prior to the adoption of ASC 606, the Company recognized the majority of its revenue based on the usage of its customers in the period the traffic traversed the Company ’ s network.
−Removed: The Company determined that ASC 606 continues to support the recognition of revenue over time for the majority of the Company ’ s contracts due to the continuous transfer of control to the customer.
−Removed: The adoption of ASC 606 did not result in a change in the Company ’ s accounting for its commission costs, which will continue to be expensed as incurred.
−Removed: The Company pays commissions over time and a corresponding requisite substantive service condition exists for the employee to receive the commission.
−Removed: The Company determined the timing of the commission payments and the underlying service performed by the employee were commensurate.
−Removed: The impact on the Company ’ s balance sheet presentation includes separately presenting customer refundable prepayments as advanced billings, whereas under ASC 605 these were included in the current portion of deferred revenue and advanced billings.
−Removed: Revenue Recognition Policy
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
Revenue recognition commences upon transfer of control of promised goods or services to customers in an amount that the Company expects to receive in exchange for those products or services.
11 unchanged sentences
Access to the Company’s communication platform is considered a series of distinct services, with continuous transfer of control to the customer, comprising one performance obligation and usage-based fees are recognized in revenue in the period the traffic traverses the Company’s network.
−Removed: For the years ended December 31, 2018, 2019 and 2020 the revenue from usage-based fees represented $ 105,481 , $ 131,626 and $ 219,817 of CPaaS revenue, respectively, and $ 32,524 , $ 29,012 and $ 40,842 of Other revenue, respectively.
+Added: For the years ended December 31, 2019, 2020 and 2021 the revenue from usage-based fees represented $ 131.6 million, $ 219.8 million and $ 319.0 million of CPaaS revenue, respectively, and $ 29.0 million, $ 40.8 million and $ 73.5 million of Other revenue, respectively.
Revenue from service fees is recognized on a ratable basis as the service is provided, which is typically one month.
−Removed: For the years ended December 31, 2018, 2019 and 2020 the revenue from service fees represented $ 55,719 , $ 61,193 and $ 72,256 of CPaaS revenue, respectively, and $ 7,174 , $ 5,638 and $ 4,181 of Other revenue, respectively.
−Removed: The remaining $ 3,215 , $ 5,125 and $ 6,017 of CPaaS revenue for the years ended December 31, 2018, 2019 and 2020 respectively, are generated from other miscellaneous services.
+Added: For the years ended December 31, 2019, 2020 and 2021 the revenue from service fees represented $ 61.2 million, $ 72.3 million and $ 87.6 million of CPaaS revenue, respectively, and $ 5.6 million, $ 4.2 million and $ 3.5 million of Other revenue, respectively.
+Added: The remaining $ 5.1 million, $ 6.0 million and $ 7.3 million of CPaaS revenue for the years ended December 31, 2019, 2020 and 2021, respectively, are generated from other miscellaneous services.
Infrequently, Bandwidth’s contracts with customers may include multiple performance obligations.
1 unchanged sentence
Generally, standalone selling prices are determined based on the prices charged to similar customers for similar services.
+Added: Notes to Consolidated Financial Statements (continued)
When required as part of providing service, revenues and associated expenses related to nonrefundable, upfront service activation and setup fees are deferred and recognized over the longer of the associated service contract period or estimated customer life.
3 unchanged sentences
Amounts that have been invoiced are recorded in accounts receivable and in revenue or deferred revenue depending on whether the revenue recognition criteria have been met.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
The Company maintains a reserve for sales credits.
10 unchanged sentences
As of December 31,
+Added: (In thousands)
Receivables (1)
+Added: $ 55,243 $ 61,572
Contract liabilities (2)
12,901 13,882
+Added: ________________________
(1) Included in accounts receivable, net of allowance for doubtful accounts on the consolidated balance sheet.
1 unchanged sentence
Deferred revenue is recorded when cash payments are received in advance of future usage on contracts.
−Removed: Revenue is typically recognized in the following month when service is rendered or, in the case of nonrefundable upfront fees, over the estimated period of benefit.
+Added: Revenue is typically recognized in the following month when service is rendered or, in the case of nonrefundable upfront fees, over the estimated period of benefit from the date the fee is incurred by the customer.
Customer refundable payments are recorded as advanced billings.
−Removed: During the year ended December 31, 2020, the Company recognized revenue of $ 3,599 related to contract liabilities recorded at the beginning of the year.
−Removed: The Company expects to recognize $ 6,515 in revenue over the next twelve months related to its contract liabilities as of December 31, 2020.
+Added: During the year ended December 31, 2021, the Company recognized revenue of $ 5.7 million related to contract liabilities recorded at the beginning of the year.
+Added: The Company expects to recognize $ 6.2 million in revenue over the next 12 months related to its contract liabilities as of December 31, 2021.
Cost of Revenue
1 unchanged sentence
Cost of revenue also contains costs related to the support of the network, web services and cloud infrastructure, capacity planning and management, rent for network facilities, software licenses, hardware and software maintenance fees, and network engineering services.
−Removed: Personnel costs (including non-cash stock-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and maintenance of the communications network, customer support, as well as, third party support agreements, and depreciation and amortization of acquired technology intangibles are also recorded as cost of revenue.
+Added: Personnel costs (including non-cash stock-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and
+Added: Notes to Consolidated Financial Statements (continued)
+Added: maintenance of the communications network, customer support, as well as, third party support agreements, and depreciation and amortization of acquired technology intangibles are also recorded as cost of revenue.
Other cost of revenue consists of amortization of capital software development costs related to platform applications supporting non-CPaaS services including circuit costs paid to third party providers, internet connectivity expenses, minutes of use, contractors, regulatory fees and surcharges, depreciation, and software and hardware maintenance fees.
1 unchanged sentence
Research and Development
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
Research and development expenses consist primarily of personnel costs (including non-cash stock-based compensation expenses), outsourced software development and engineering services and cloud infrastructure fees for staging and development outsourced engineering services.
6 unchanged sentences
Cash and Cash Equivalents
−Removed: The Company classifies all highly liquid investments with original stated maturities of three months or less from the date of purchase as cash equivalents and all highly liquid investments with original stated maturities of greater than three months from the date of purchase as current marketable securities, with the exception of time deposits which are classified as other investments.
+Added: The Company classifies all highly liquid investments with original stated maturities of three months or less from the date of purchase as cash equivalents.
+Added: All highly liquid investments with original stated maturities of greater than three months from the date of purchase are classified as current marketable securities, with the exception of time deposits with maturities greater than ninety days which are classified as other investments.
Cash deposits are primarily in financial institutions in the United States.
1 unchanged sentence
The Company has a policy of making investments only with commercial institutions that have at least an investment grade credit rating.
−Removed: The Company invests its cash primarily in government securities and obligations, corporate debt securities, money market funds and reverse repurchase agreements (“RRAs”).
−Removed: RRAs are collateralized by deposits in the form of Government Securities and Obligations for an amount not less than 102 % of their value.
−Removed: The Company does not record an asset or liability as the Company is not permitted to sell or repledge the associated collateral.
−Removed: The Company has a policy that the collateral has at least an “A” (or equivalent) credit rating.
−Removed: The Company utilizes a third-party custodian to manage the exchange of funds and ensure that collateral received is maintained at 102 % of the value of the RRAs on a daily basis.
−Removed: RRAs with stated maturities of greater than three months from the date of purchase are classified as marketable securities.
+Added: The Company utilizes money market funds as an investment option and only invests in AAA rated funds.
Restricted Cash
−Removed: Restricted cash consists primarily of the Holdback remaining to be paid to the Selling Stockholders of Voxbone, employee withholding tax liability and employee benefits contributions not yet remitted.
+Added: Restricted cash consists primarily of employee withholding tax liability and employee benefits contributions not yet remitted.
The Company has classified this asset as a short-term asset in order to match the expected period of restriction.
3 unchanged sentences
The Company regularly reviews the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, customer creditworthiness, current economic trends, and reasonable and supportable forecasts about the future.
−Removed: Relevant risk characteristics include customer size and historical loss patterns.
−Removed: Management has evaluated the expected credit losses related to trade accounts receivable and determined that allowances of approximately $ 769 and $ 1,203 for uncollectible accounts and customer balances that are disputed were required as of December 31, 2019 and December 31, 2020, respectively.
+Added: Relevant risk
+Added: Notes to Consolidated Financial Statements (continued)
+Added: characteristics include customer size and historical loss patterns.
+Added: Management has evaluated the expected credit losses related to trade accounts receivable and determined that allowances of approximately $ 1.2 million and $ 1.7 million for uncollectible accounts and customer balances that are disputed were required as of December 31, 2020 and December 31, 2021, respectively.
Refer to Note 5, “Financial Statement Components” to these consolidated financial statements, for a rollforward of the components of the allowances as of December 31, 2020 and December 31, 2021.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: Refer to the Recently Adopted Accounting Standard section for the adoption of ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses for discussion of financial assets measured at amortized cost, including trade receivables.
The Company includes unbilled receivables in its accounts receivable balance.
−Removed: Generally, these receivables represent services provided to customers, which will be billed in the next billing cycle.
+Added: Generally, these receivables represent earned revenue from services provided to customers, which will be billed in the next billing cycle.
All amounts are considered collectible and billable.
−Removed: As of December 31, 2019 and December 31, 2020, unbilled receivables were $ 16,200 and $ 27,692 , respectively.
+Added: As of December 31, 2020 and December 31, 2021, unbilled receivables were $ 27.7 million and $ 31.8 million, respectively.
Concentration of Credit Risk
−Removed: Financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents, marketable securities, other investments and trade accounts receivable.
+Added: Financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents, other investments and trade accounts receivable.
Cash deposits may be in excess of insured limits.
2 unchanged sentences
The Company believes that no additional credit risk beyond amounts provided for by the allowance for doubtful accounts are inherent in accounts receivable.
−Removed: As of December 31, 2019, no individual customer represented more than 10% of the Company’s accounts receivable, net of allowance for doubtful accounts.
−Removed: As of December 31, 2020, one individual customer represented approximately 11 % of the Company’s accounts receivable, net of allowance for doubtful accounts.
−Removed: For the years ended December 31, 2018, 2019 and 2020, no individual customer represented more than 10% of the Company’s total revenue.
+Added: As of December 31, 2020 and December 31, 2021, one individual customer represented approximately 11 % and 10 %, respectively, of the Company’s accounts receivable, net of allowance for doubtful accounts.
+Added: For the years ended December 31, 2019, 2020 and 2021, no individual customer represented more than 10% of the Company’s revenue.
Property and Equipment, net
16 unchanged sentences
Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing.
−Removed: The Company also capitalizes costs related to specific upgrades and enhancements when the expenditures will result in additional functionality, and expenses
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: costs incurred for maintenance and minor upgrades and enhancements.
+Added: The Company also capitalizes costs related to
+Added: Notes to Consolidated Financial Statements (continued)
+Added: specific upgrades and enhancements when the expenditures will result in additional functionality, and expenses costs incurred for maintenance and minor upgrades and enhancements.
Costs related to preliminary project activities and post-implementation operating activities are expensed as incurred.
3 unchanged sentences
Debt Issuance Costs
−Removed: The Company incurred debt issuance costs associated with obtaining and entering into credit agreements.
+Added: The Company incurs debt issuance costs associated with obtaining and entering into credit agreements and issuing convertible notes.
These costs customarily include non-refundable structuring fees, commitment fees, up-front fees and syndication expenses.
−Removed: The Company has a policy to defer and amortize these costs based on the effective interest method over the term of the credit agreements.
+Added: The Company has a policy of deferring and amortizing these costs based on the effective interest method over the term of the credit agreements or the convertible notes, as applicable.
+Added: Amortization of Intangibles
+Added: Intangible assets determinable economic lives are carried at cost, less accumulated amortization.
+Added: Amortization is computed over the estimated useful life of each asset on a straight-line basis.
+Added: The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset.
+Added: Factors the Company considers when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company's long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions.
+Added: Intangible assets without determinable economic lives are carried at cost, not amortized and reviewed for impairment at least annually.
+Added: Refer to Note 8, “Goodwill and Intangible Assets” to these consolidated financial statements, for the useful lives of the Company's intangible assets as of December 31, 2020 and December 31, 2021.
The Company reviews goodwill and indefinite-lived intangible assets at least annually, as of December 31, for possible impairment.
12 unchanged sentences
If these estimates or related assumptions change in the future, the Company may be required to record an impairment charge.
−Removed: As of December 31, 2019 and 2020, the Company has recorded goodwill of $ 6,867 and $ 372,239 , respectively.
+Added: As of December 31, 2020 and 2021, the Company has recorded goodwill of $ 372.2 million and $ 344.4 million, respectively.
No goodwill impairment charges were recorded for the years ended December 31, 2019, 2020 and 2021.
+Added: Notes to Consolidated Financial Statements (continued)
Impairment of Long-Lived Assets
3 unchanged sentences
Business Combinations
−Removed: The Company uses the acquisition method of accounting for business combinations which requires the tangible and intangible assets acquired and liabilities assumed to be recorded at their respective fair market value as
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: of the acquisition date.
+Added: The Company uses the acquisition method of accounting for business combinations which requires the tangible and intangible assets acquired and liabilities assumed to be recorded at their respective fair market value as of the acquisition date.
Goodwill represents the excess of the consideration transferred over the fair value of the net assets acquired.
4 unchanged sentences
The Company expenses advertising costs as incurred.
−Removed: Advertising costs totaled $ 953 , $ 1,528 and $ 1,617 for the years ended December 31, 2018, 2019 and 2020, respectively, which are included in sales and marketing expenses in the accompanying consolidated statements of operations.
+Added: Advertising costs totaled $ 1.5 million, $ 1.6 million and $ 1.8 million for the years ended December 31, 2019, 2020 and 2021, respectively, which are included in sales and marketing expenses in the accompanying consolidated statements of operations.
Commissions consist of variable compensation earned by sales personnel and third-party resellers.
9 unchanged sentences
The Company accounts for income taxes under the asset and liability method.
−Removed: Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates.
+Added: Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax
+Added: Notes to Consolidated Financial Statements (continued)
+Added: basis of assets and liabilities using enacted tax rates.
The Company recognizes the effect of a change in tax rates on deferred tax assets and liabilities in the period that includes the enactment date.
4 unchanged sentences
The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination.
−Removed: The tax benefit recognized is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: The tax benefit recognized is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position.
The Company recognizes potential accrued interest and penalties associated with unrecognized tax positions in income tax expense.
9 unchanged sentences
Diluted net income per share is calculated by giving effect to all potentially dilutive common stock when determining the weighted-average number of common shares outstanding.
−Removed: For purposes of the diluted net income (loss) per share calculation, options and warrants to purchase common stock and redeemable convertible preferred stock are considered to be potential common stock.
−Removed: Historically, the Company issued securities other than common stock that participated in dividends (“Participating Securities”).
−Removed: These Participating Securities included the Series A redeemable convertible preferred stock.
−Removed: On November 9, 2017, the Participating Securities were converted to Class B common stock immediately prior to the IPO.
+Added: For purposes of the diluted net income (loss) per share calculation, options to purchase common stock, restricted stock units and redeemable convertible preferred stock are considered to be potential common stock.
Foreign currency translation
The Company has foreign operations with non-USD functional currencies.
−Removed: The Euro and British Pound are the functional currencies for the Company’s international operations.
+Added: The Euro and British Pound are the primary functional currencies for the Company’s international operations.
All of the assets and liabilities of these subsidiaries are converted to U.S.
1 unchanged sentence
Revenue and expenses are translated at average exchange rates in effect during each reporting period .
−Removed: Income and expense items are translated at average rates for the period.
The net effect of foreign currency translation adjustments is included in shareholder’s equity as a component of “ Accumulated other comprehensive loss ” line item in the accompanying consolidated balance sheets.
−Removed: Foreign currency transaction gains and losses are the result of exchange rate changes during the period of time between the consummation and cash settlement of transactions denominated in currencies other than the functional currency.
+Added: Foreign currency transaction gains and losses are the result of exchange rate changes during the period of time between the consummation and cash settlement of transactions denominated in currencies other than the
+Added: Notes to Consolidated Financial Statements (continued)
+Added: functional currency.
Foreign currency transaction gains and losses are recognized in current period earnings as incurred.
−Removed: Foreign exchange gains and losses, which result from the process of remeasuring foreign currency transactions into the appropriate functional currency, are included in other income, net in the Company’s consolidated statements of operations.
−Removed: The Company recorded $ 0 , $ 9 , $ 32 in related gains during the years ended December 31, 2018, 2019 and 2020.
+Added: Foreign exchange gains and losses, which result from the process of remeasuring foreign currency transactions into the appropriate functional currency, are included in other income (expense), net in the Company’s consolidated statements of operations.
+Added: The Company recorded less than $ 0.1 million in related gains and losses during each of the years ended December 31, 2019, 2020 and 2021.
Fair Value of Financial Instruments
−Removed: The carrying amounts of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses approximate fair value as of December 31, 2019 and December 31, 2020 because of
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: the relatively short duration of these instruments.
−Removed: Marketable securities consist of U.S.
−Removed: treasury securities not otherwise classified as cash equivalents.
−Removed: All marketable securities are considered to be available-for-sale and are recorded at their estimated fair values.
−Removed: Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive (loss) income.
The Company minimizes its credit risk associated with investments by investing primarily in investment grade, liquid securities.
12 unchanged sentences
Recently Adopted Accounting Standards
−Removed: In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ( “ ASU ” ) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
−Removed: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract .
−Removed: This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
−Removed: ASU 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019.
−Removed: As a result of the Company ’ s prospective adoption of this standard, the Company capitalized i mplementation costs related to cloud computing arrangements of $ 572 as of December 31, 2020.
−Removed: See Note 7, “Property and Equipment” to these consolidated financial statements, for additional details.
−Removed: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):
−Removed: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements.
−Removed: ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019 and for interim periods within those fiscal years.
−Removed: The adoption of this standard did not have a material impact on the Company ’ s financial statements.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , which simplifies the accounting for goodwill impairment.
−Removed: The ASU removes the second step of the goodwill impairment test that requires a hypothetical purchase price allocation.
−Removed: A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
−Removed: ASU 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019.
−Removed: The adoption of this standard did not have a material impact on the Company’s financial statements.
−Removed: In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses:
−Removed: Measurement of Credit Losses on Financial Instruments , which changes the impairment model for most financial assets.
−Removed: The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses.
−Removed: In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses , which clarifies that receivables arising from operating leases are not within the scope of Topic 326, Financial Instruments – Credit Losses.
−Removed: Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases.
−Removed: In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies how to apply certain aspects of the new credit losses standard.
−Removed: In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):
−Removed: Effective Dates , which amends certain effective dates for the new standard.
−Removed: In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses , which clarifies how to apply certain aspects of the new credit losses standard.
−Removed: The accounting standard is effective for annual and interim periods beginning after December 15, 2019.
−Removed: The Company adopted this standard for financial assets measured at amortized cost, including trade receivables.
−Removed: Results for the reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP.
−Removed: The adoption of this standard did not have a material impact on the Company’s financial statements.
+Added: In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):
+Added: Simplifying the Accounting for Income Taxes , which is intended to simplify various aspects related to accounting for income taxes.
+Added: ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.
+Added: ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.
+Added: The Company adopted this standard on January 1, 2021 on a prospective basis, which did not have a material impact on the Company’s financial statements.
+Added: Notes to Consolidated Financial Statements (continued)
Recent Accounting Pronouncements Not Yet Adopted
−Removed: In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which is intended to address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to GAAP.
−Removed: The FASB's intentions for this update is to clarify the codification or correct unintended application of guidance and is not expected to result in a significant change in practice.
−Removed: Amendments include removal of certain references in concept statements, simplification to wording, and the addition of all disclosure-related guidance in the disclosure sections of the codification.
−Removed: The amendments in this update do not change GAAP and transition guidance is primarily for entities that may have applied guidance being amended in an inconsistent manner.
−Removed: This update is effective for annual periods beginning after December 15, 2020, for public business entities.
−Removed: The Company is evaluating the effect of this update on its financial statements.
+Added: In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt —Modifications and Extinguishments (Subtopic 470-50), Compensation--Stock Compensation (Topic 718), and Derivatives and Hedging--Contracts in Entity's Own Equity (Subtopic 815-40) , which is intended to provide clarity surrounding the treatment for a modification or an exchange of a freestanding equity-classified written call option.
+Added: The amendments also provide guidance for the recognition and measurement of earnings-per-share (“EPS”) for certain modifications or exchanges of freestanding equity-classified written call options for entities that present EPS.
+Added: The amendments do not affect a holder’s accounting for freestanding call options.
+Added: ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.
+Added: Early adoption is permitted, including adoption in an interim period.
+Added: The Company did not and does not expect to have any modification or exchanges of freestanding written call options classified in equity during the reporting period and therefore does not expect adoption will have a material impact on its financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) , which is intended to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity.
−Removed: For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance on the basis of feedback from financial statement users.
+Added: For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and EPS guidance on the basis of feedback from financial statement users.
ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021.
Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.
−Removed: The Company is evaluating the effect of adopting this new accounting guidance on its financial statements but does not intend to early adopt.
−Removed: In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):
−Removed: Simplifying the Accounting for Income Taxes , which is intended to simplify various aspects related to accounting for income taxes.
−Removed: ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: guidance to improve consistent application.
−Removed: ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.
−Removed: Early adoption is permitted, including adoption in an interim period.
−Removed: The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on its financial statements.
+Added: The Company will adopt the new guidance on January 1, 2022 using the modified retrospective approach resulting in adjustments in accumulated deficit and paid in capital.
+Added: The Company will also record an increase in the convertible notes balance as a result of the reversal of the separation of the convertible debt between debt and equity.
+Added: The adoption of this standard will decrease the amount of non-cash interest expense to be recognized in future periods as a result of eliminating the discount associated with the equity component.
+Added: The number of diluted shares will increase as a result of transitioning from the treasury stock method to the as-if converted method for the calculation.
+Added: The Company is currently quantifying the effect of adopting this new accounting guidance on its financial statements and earnings per share calculations.
Business Combination
Voxbone Acquisition
−Removed: On November 2, 2020, the Company completed the acquisition of Voxbone for total estimated purchase consideration of approximately $ 519,384 , consisting of cash and 663,394 shares of Bandwidth’s Class A common stock.
−Removed: The total estimated purchase consideration is subject to adjustment upon finalization of the net working capital adjustment.
−Removed: Voxbone is an international enterprise cloud communications leader with European-based communications platform and IP voice network.
−Removed: With a global network and extensive regulatory expertise, Voxbone is a national operator in markets around the world, with coverage across 93 % of the world by GDP.
−Removed: The Company acquired Voxbone to accelerate its international strategy by several years, giving the company a footprint in 60 + countries.
−Removed: The purchase consideration exchanged to consummate the acquisition reflects the fair value of the Company's shares issued and the cash paid to the holders of Voxbone’s equity.
−Removed: The fair value of the shares is based on the final closing price of shares of Bandwidth Class A common stock prior to the effective time of the acquisition, which was $ 160.355 per share, determined as of October 30, 2020.
−Removed: Preliminary Purchase Price Allocation
−Removed: For purposes of accounting for the acquisition, the Company was determined to be the accounting acquirer.
−Removed: The Company applied the acquisition method of accounting with respect to the identifiable assets and liabilities of Voxbone, which have been measured at their estimated fair value as of the date of the business combination.
−Removed: Estimates of the fair value of Voxbone’s assets represent management’s best estimate of assumptions about future events and uncertainties, including significant judgments related to future cash flows, discount rates, competitive trends, margin and revenue growth assumptions, royalty rate, customer attrition rates, market comparables, and others, as applicable.
−Removed: Inputs used were generally obtained from historical data, supplemented by current and anticipated market conditions and growth rates.
−Removed: The following table summarizes the preliminary allocation of purchase price to the identifiable assets acquired and liabilities assumed by Bandwidth, with the excess of purchase price over the fair value of Voxbone’s net assets recorded as goodwill.
−Removed: Due to the timing and the magnitude of the transaction and the multi-jurisdictional nature of the net assets acquired, initial accounting for the acquisition is not complete, and further measurement period adjustments may occur in fiscal year 2021.
−Removed: The Company has estimated the preliminary fair value of net assets acquired based on information currently available and will continue to adjust those estimates as additional information becomes available, including the refinement of market participant assumptions and finalization of tax returns in the pre-acquisition period.
−Removed: The Company will reflect measurement period adjustments in the period in which the adjustments are determined.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: The aggregate purchase consideration has been preliminarily allocated as follows:
−Removed: Estimated fair value
−Removed: Purchase Price:
−Removed: Fair value of cash paid (1)
−Removed: Fair value of Bandwidth common stock issued
−Removed: Total purchase consideration
−Removed: ________________________
−Removed: (1) Amount subject to adjustment upon finalization of the net working capital adjustment.
−Removed: Estimated fair value
−Removed: Purchase Price Allocation:
−Removed: Accounts receivable 5,873
−Removed: Other current assets 3,315
−Removed: Property and equipment 3,865
−Removed: Intangible assets 232,600
−Removed: Other non-current assets 3,418
−Removed: Total current liabilities ( 17,581 )
−Removed: Deferred tax liability ( 58,149 )
−Removed: Other non-current liabilities ( 4,881 )
−Removed: Net identifiable assets acquired 172,820
−Removed: Goodwill 346,564
−Removed: Net assets acquired $ 519,384
−Removed: Identifiable intangible assets
−Removed: The estimated preliminary fair value and weighted average useful life of the Voxbone identifiable intangible assets are as follows.
−Removed: Fair value Weighted average useful life
−Removed: Developed technology $ 84,100 10
−Removed: Customer relationships 148,500 15
−Removed: Preliminary fair value of identifiable intangible assets
−Removed: Developed technology represents certain proprietary technology that Voxbone uses to deliver its services.
−Removed: Preliminary fair values were determined using a relief from royalty methodology, which estimates the cost savings generated by a company based upon the ownership of an asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of the asset.
−Removed: The discount rate used was determined at the time of measurement based on an analysis of the implied internal rate of return of the transaction, weighted average cost of capital and weighted average return on assets.
−Removed: The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: Customer relationships represent the preliminary fair value of existing relationships with the Voxbone customers.
−Removed: The preliminary fair value of customer relationships was determined using the Multi-Period Excess Earning Method, which involves isolating the net earnings attributable to the asset being measured based on the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life.
−Removed: The valuation includes the valuation of the assembled workforce, using the Cost Approach, for purposes of calculating contributory asset charges to be used in the Multi-Period Excess Earning Method valuations.
−Removed: The economic useful life was determined based on historical customer attrition rates.
−Removed: The Company believes that the amounts of purchased intangible assets recorded represent the preliminary fair values of and approximates the amounts a market participant would pay for these intangible assets as of the acquisition date.
−Removed: The fair value of accounts receivables acquired is $ 5,873 , with the gross contractual amount being $ 6,453 .
−Removed: The Company expects $ 580 to be uncollectible.
−Removed: The excess of the consideration for the acquisition over the preliminary fair value of net assets acquired was recorded as goodwill.
−Removed: The estimated goodwill recognized is attributable primarily to expected synergies and expanded market opportunities from combining the Company’s operations with those of Voxbone.
−Removed: The goodwill created in the acquisition is not expected to be deductible for tax purposes and is subject to revision as the purchase price allocation is completed.
−Removed: Goodwill arising from the acquisition has been allocated to the CPaaS reporting segment.
−Removed: Transaction Costs
−Removed: The Company recognized $ 14,458 of acquisition related costs that were expensed in the current period.
−Removed: These costs consist of mainly fees for financial and legal services, due diligence services, success fees, and net loss on foreign currency exchange directly associated with cash payments in foreign currencies as instructed by SPA of which $ 12,675 is included in general and administrative expenses and $ 1,783 is included in other income (expense), net in the consolidated statements of operations.
−Removed: Results of Voxbone Subsequent to the Acquisition
−Removed: The operating results of Voxbone have been included in the Company’s consolidated financial statements from the date of acquisition through December 31, 2020.
−Removed: The Company’s consolidated statement of operations for the year ended December 31, 2020 included revenues of $ 17,541 and a net loss of ($ 3,112 ), which includes the effects of purchase accounting adjustments, primarily the amortization of intangible assets.
−Removed: Unaudited Pro Forma Information
−Removed: The following unaudited pro forma financial information summarizes the combined results of operations for the Company and Voxbone as if the acquisition had been completed on January 1, 2019.
−Removed: The pro forma results have been prepared for comparative purposes only, and do not necessarily represent what the revenue or results of operations would have been had the acquisition been completed on January 1, 2019.
−Removed: In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved.
−Removed: The unaudited pro forma information includes adjustments for the preliminary purchase price accounting impact (including, but not limited to, amortization for intangible assets, the purchase accounting effect on deferred revenue, transaction costs and related tax impacts) and the alignment of accounting policies.
−Removed: The pro forma results for the period ending December 31, 2020 also include the non-recurring transaction costs totaling $ 14,458 .
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: Year ended December 31,
−Removed: Revenue $ 297,377 $ 411,830
−Removed: Net loss attributable to common stockholders $ ( 7,737 ) $ ( 42,675 )
+Added: On November 2, 2020, the Company acquired all of the A Ordinary Shares, B Ordinary Shares and C Ordinary Shares of Voice Topco Limited (“Voice Topco”) through a Share Purchase Agreement (the “Share Purchase Agreement” and such purchase, the “Share Purchase”).
+Added: Voice Topco directly or indirectly held all of the issued and outstanding shares of Voxbone S.A., which (with its subsidiaries) was the operating subsidiary of Voice Topco (“Voxbone”).
+Added: The transaction was valued at € 446 million.
+Added: As consideration for the Share Purchase, the Company (i) paid the selling stockholders approximately $ 400 million (or approximately € 338 million based on prevailing exchange rates at the close of business on October 9, 2020) at the Closing and (ii) issued to the selling stockholders at the Closing shares of the Company’s Class A common stock, with an aggregate value of approximately € 108 million (or approximately $ 128 million based on prevailing exchange rates at the close of business on October 9, 2020).
+Added: During the year ended December 31, 2021 the Company made measurement period adjustments to reflect facts and circumstances in existence as of October 31, 2020, the effective date of the Share Purchase (the “Effective Date”).
+Added: The adjustments primarily related to certain state and local tax liabilities as well as an adjustment related to the finalization of the net working capital adjustment which were not reasonably estimable at the Effective Date and
+Added: Notes to Consolidated Financial Statements (continued)
+Added: consisted of a $ 1.0 million increase to goodwill and $ 1.0 million increase to accrued expenses and other current liabilities.
+Added: The Company, in accordance with the Share Purchase Agreement (“SPA”), paid the selling stockholders $ 7.6 million, which included $ 7.4 million of the amount held in escrow as a holdback amount and $ 0.2 million in interest earned from the escrow.
Fair Value Measurements
5 unchanged sentences
Level 1 Level 2 Level 3 Total
+Added: (In thousands)
Financial assets:
1 unchanged sentence
Money market account $ 57,517 $ — $ — $ 57,517
+Added: Other investments:
Time deposits 40,000 — — 40,000
3 unchanged sentences
Level 1 Level 2 Level 3 Total
+Added: (In thousands)
Financial assets:
1 unchanged sentence
Money market account $ 241,157 $ — $ — $ 241,157
−Removed: Other investments:
−Removed: Time deposits 40,000 — — 40,000
Total financial assets $ 241,157 $ — $ — $ 241,157
−Removed: As of December 31, 2020, the fair value of the Convertible Notes, as further described in Note 9, “Debt”, was approximately $ 716,250 .
+Added: As of the years ended December 31, 2020 and 2021, the fair value of the 2026 Convertible Notes, as further described in Note 9, “Debt”, was approximately $ 716.3 million and $ 427.1 million, respectively.
+Added: As of December 31, 2021, the fair value of the 2028 Convertible Notes, as further described in Note 9, “Debt”, was approximately $ 194.2 million.
The fair value was determined based on the closing price for the Convertible Notes on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.
−Removed: As of December 31, 2020, the fair value of the Pension Plan's assets, as further described in Note 14, “Employee Benefit Plan”, was approximately $ 2,882 .
+Added: As of the years ended December 31, 2020 and 2021, the fair value of the Pension Plan’s assets, as further described in Note 14, “Employee Benefit Plans”, was approximately $ 2.9 million and $ 3.0 million, respectively.
The fair value was determined by an independent actuary and is considered as Level 2 in the fair value hierarchy.
+Added: Notes to Consolidated Financial Statements (continued)
The Company monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy.
Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another.
−Removed: In such instances,
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: the transfer is reported at the beginning of the reporting period.
+Added: In such instances, the transfer is reported at the beginning of the reporting period.
There were no transfers between Levels 1, 2 or 3 during the years ended December 31, 2020 and 2021.
The money market account is included in cash and cash equivalents in the consolidated balance sheets as of December 31, 2020 and December 31, 2021.
−Removed: During the December 31, 2018, 2019 and 2020 there were $ 18,000 , $ 69,000 and $ 0 in maturities of marketable securities, respectively.
+Added: During the year ended December 31, 2019, there was $ 69.0 million in maturities of marketable securities.
+Added: There were no maturities in marketable securities during the years ended December 31, 2020 and 2021, respectively.
There were no sales of marketable securities for the years ended December 31, 2020 and 2021.
−Removed: Proceeds and gross realized gains from sales of marketable securities were $ 17,467 and $ 4 , respectively for the year ended December 31, 2019.
−Removed: The cost of the securities sold was based on the specific identification method and the gross realized gain is recorded as other income, net, in the consolidated statements of operations.
−Removed: Interest earned on marketable securities was $ 77 , $ 6 , and $ 0 for the years ended December 31, 2018, 2019 and 2020 respectively, and is recorded within other income (expense), net in the accompanying consolidated statements of operations.
+Added: Proceeds and gross realized gains from sales of marketable securities were $ 17.5 million and less than $0.1 million, respectively for the year ended December 31, 2019.
+Added: The cost of the securities sold was based on the specific identification method and the gross realized gain is recorded as other income (expense), net, in the consolidated statements of operations.
+Added: Interest earned on marketable securities was less than $ 0.1 million for the years ended December 31, 2019, 2020 and 2021, respectively, and is recorded within other income (expense), net in the accompanying consolidated statements of operations.
Financial Statement Components
1 unchanged sentence
As of December 31,
+Added: (In thousands)
Trade accounts receivable $ 26,504 $ 31,036
6 unchanged sentences
Year ended December 31,
+Added: (In thousands)
Allowance for doubtful accounts:
2 unchanged sentences
Deductions (1) 888 416
+Added: Impact of foreign currency translation — 39
Balance, end of period $ ( 1,203 ) $ ( 1,661 )
________________________
+Added: Notes to Consolidated Financial Statements (continued)
(1) Write off of uncollectible accounts after all collection efforts have been exhausted.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
Accrued expenses and other current liabilities consisted of the following:
As of December 31,
+Added: (In thousands)
Accrued expense $ 31,549 $ 31,264
1 unchanged sentence
Accrued sales, use, VAT and telecommunications related taxes 9,142 11,046
−Removed: Other accrued expenses 904 2,657
Current portion of finance lease 183 177
+Added: Other accrued expenses 2,657 4,392
Total accrued expenses and other current liabilities $ 63,065 $ 65,921
Right-of-Use Asset and Lease Liabilities
−Removed: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).
−Removed: Under the new standard, lessees are required to recognize in the balance sheet the right-of-use (“ROU”) assets and lease liabilities that arise from operating leases.
−Removed: As a result of the Company no longer qualifying as an “emerging growth company” based on its public float as of the end of the three months ended June 30, 2019, the ASU was adopted as of December 31, 2019 with an effective date as of the beginning of the Company’s fiscal year, January 1, 2019.
−Removed: The standard was applied to the operating leases that existed on that date using the optional alternative method on a prospective basis.
−Removed: Prior year comparative financial information was recast under the new standard to be presented under ASC 842.
−Removed: ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
+Added: Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
The Company determines if an arrangement is a lease at inception.
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.
−Removed: Operating lease expense attributable to lease payments is recognized on a straight-line basis over the lease term and is included in cost of sales and selling, general, and administrative expense on our consolidated statement of operations.
+Added: Operating lease expense attributable to lease payments is recognized on a straight-line basis over the lease term and is included in general and administrative expense on the Company’s consolidated statements of operations.
Finance leases result in the recognition of depreciation expense, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method.
−Removed: Depreciation expense attributable to finance leases is included in cost of sales on our consolidated statement of operations.
−Removed: The Company presents the operating leases in long-term assets and current and long-term liabilities in the accompanying consolidated balance sheet as of December 31, 2020.
−Removed: Finance leases are reported in property and equipment, net, accrued expenses and other current liabilities, and other liabilities on the Company's consolidated balance sheet.
−Removed: The Company sub-leases approximately 17,073 square feet of office space to a related party, Republic Wireless, Inc.
−Removed: ( “ Republic ” ).
+Added: Depreciation expense attributable to finance leases is included in general and administrative expense on the Company’s consolidated statements of operations.
+Added: The Company presents the operating leases in long-term assets and current and long-term liabilities in the accompanying consolidated balance sheets.
+Added: Finance leases are reported in property, plant and equipment, net, accrued expenses and other current liabilities, and other liabilities on the Company’s consolidated balance sheets.
+Added: The Company sub-leases approximately 17,073 square feet of office space to a related party, Relay, Inc.
+Added: (f/k/a Republic Wireless, Inc.) (“Relay”).
Future minimum sub-lease receipts required under the non-cancellable lease are as follows:
As of December 31,
−Removed: As of December 31, 2020, the Company had various leased properties in the United States and the rest of the world, with remaining lease terms of eleven months to 6 years, some of which include options to extend the leases for up to 5 years.
−Removed: None of the options to extend the leases are recognized in operating lease ROU assets or lease
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: (In thousands)
+Added: As of December 31, 2021, the Company had various leased properties in the United States and internationally, with remaining lease terms of six months to 5 years, some of which include options to extend the leases for up to 5 years.
+Added: None of the options to extend the leases are recognized in operating lease ROU assets or lease liabilities.
The Company has one lease with an early-termination option, which it does not expect to exercise.
−Removed: The components of lease expense recorded in the consolidated statement of operations were as follows:
+Added: The Company has a lease not yet commenced, with a lease term of 20 years and two options to extend the lease by a term of ten years each, up to twenty additional years in total.
+Added: The components of lease expense recorded in general and administrative expenses in the consolidated statement of operations were as follows:
+Added: Notes to Consolidated Financial Statements (continued)
Year ended December 31,
+Added: 2019 2020 2021
+Added: (In thousands)
Operating lease cost $ 5,548 $ 5,949 $ 6,818
Finance lease cost:
−Removed: Amortization of assets — 20
+Added: Depreciation of assets — 20 218
Interest on lease liabilities — 2 18
3 unchanged sentences
(1) See Note 16, “Related Parties” to these consolidated financial statements, for additional details on sublease income.
−Removed: During the years ended December 31, 2019 and 2020, short-term operating lease expense were $ 22 and $ 199 , respectively.
+Added: During the years ended December 31, 2019, 2020 and 2021, short-term operating lease expense was $ 0.0 million, $ 0.2 million and $ 1.3 million, respectively.
Supplemental balance sheet information related to leases was as follows:
1 unchanged sentence
Leases Classification 2020 2021
+Added: (In thousands)
Operating lease assets Operating right-of-use asset, net (1) $ 19,491 $ 14,061
−Removed: Finance lease assets Property and equipment, net (2) — 464
+Added: Finance lease assets Property, plant and equipment, net (2) 464 373
Total leased assets $ 19,955 $ 14,434
5 unchanged sentences
________________________
−Removed: (1) Operating lease assets are recorded net of accumulated amortization of $ 4,269 and $ 9,083 as of December 31, 2019 and December 31, 2020, respectively.
−Removed: (2) Finance lease assets are recorded net of accumulated depreciation of $ 0 and $ 28 as of December 31, 2019 and December 31, 2020, respectively.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: (1) Operating lease assets are recorded net of accumulated amortization of $ 9.1 million and $ 14.8 million as of December 31, 2020 and December 31, 2021, respectively.
+Added: (2) Finance lease assets are recorded net of accumulated depreciation of $ 0.0 million and $ 0.2 million as of December 31, 2020 and December 31, 2021, respectively.
+Added: Notes to Consolidated Financial Statements (continued)
Supplemental cash flow and other information related to leases was as follows:
Year ended December 31,
+Added: 2019 2020 2021
+Added: (In thousands)
Cash paid for amounts included in the measurement of lease liabilities
8 unchanged sentences
Finance leases — % 4.00 % 3.91 %
−Removed: Maturities of operating lease liabilities were as follows:
−Removed: As of December 31,
−Removed: Thereafter 751
−Removed: Total lease payments 24,919
−Removed: imputed interest ( 2,202 )
−Removed: accrued lease incentive —
−Removed: Total lease obligations 22,717
−Removed: current obligations ( 5,515 )
−Removed: Long-term lease obligations $ 17,202
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: Maturities of financing lease liabilities were as follows:
+Added: Maturities of lease liabilities were as follows:
As of December 31, 2021
+Added: Operating Leases Finance Leases
+Added: (In thousands)
+Added: 2022 $ 6,422 $ 191
+Added: 2023 6,601 121
+Added: 2024 2,649 75
+Added: 2025 1,623 10
Total lease payments 17,987 397
3 unchanged sentences
Long-term lease obligations $ 10,958 $ 202
+Added: On June 4, 2021, the Company purchased approximately 40 acres of undeveloped land (the “Property”) in Raleigh, North Carolina, from the State of North Carolina (the “State”).
+Added: The Company paid $ 30.0 million for the land.
+Added: Additionally, as consideration for the Property, the Company agreed to construct, at its expense, a parking lot and related improvements (the “Parking Improvements”) on land owned by the State adjacent to the Property.
+Added: The estimated cost of construction of the Parking Improvements was $ 7.8 million.
+Added: Subsequent to the purchase of the Property, the Company sold a portion of the Property constituting approximately 23.76 acres (the “Conveyed Parcel”) to USEF Edwards Mill Owner, LLC (the “Developer”) for $ 17.5 million.
+Added: In addition, the Developer agreed to construct, at its expense, the Parking Improvements in connection with the Company’s purchase of the Property from the State.
+Added: The Company retained approximately 17.06 acres of the Property, which was recorded at cost and is included in the Company’s consolidated balance sheet as a component property, plant and equipment, net.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Company recorded an asset for the Developer’s obligation to construct the Parking Improvements at the Developer's expense, which is included as a component of prepaid expenses and other current assets in the consolidated balance sheet as of December 31, 2021.
+Added: A lease incentive of $ 4.7 million was recognized for the difference between the consideration received from the Developer for the Conveyed Parcel and the cost basis of the Conveyed Parcel and is included as a component of other liabilities on the consolidated balance sheet.
+Added: On October 1, 2021, the developer delivered the completed parking improvements and the State released the Company from its liability.
+Added: On May 27, 2021, the Company entered into a Lease Agreement (the “Lease”) with the Developer for the Conveyed Parcel, together with improvements for office and related infrastructure to be constructed thereon, collectively constituting approximately 534,000 gross square feet (the “Project”).
+Added: The lease became effective upon closing of the sale of the Conveyed Parcel to the Developer.
+Added: When construction of the Project is completed, the Company intends to relocate its corporate headquarters to the Project.
+Added: The lease term will commence upon substantial completion of the final building to be delivered, as evidenced by a certificate of occupancy issued by the City of Raleigh (the “Commencement Date”), and continue for a period of twenty ( 20 ) years (the “Initial Term”).
+Added: It is anticipated that the Commencement Date will occur in May 2023.
+Added: The Company has the option to renew the Initial Term for two ten-year periods at a rental rate equal to 100 % of the then-prevailing market rental rate for comparable buildings in the Raleigh, North Carolina, market.
+Added: Upon the effective date, the Company deposited $ 2.5 million with the Developer as security on the lease.
+Added: The deposit is included in other long-term assets on the Company’s consolidated balance sheet.
+Added: Additionally, the Company placed $ 3.0 million in escrow to fund the certain tenant improvements expected to be constructed as part of the development of the Project.
+Added: No right-of-use assets or lease liabilities have been recognized in connection with the lease as of December 31, 2021.
+Added: Future lease payments are included in Note 13, “Commitments and Contingencies”.
Asset Retirement Obligation
The Company has an obligation to return one of its leased properties to its original leased condition.
−Removed: These cost are accrued at the present value of expected cost to settle the obligation using estimated cash flows.
+Added: These costs are accrued at the present value of expected cost to settle the obligation using estimated cash flows.
The cash flows are discounted at a current pre-tax rate that reflects the risk specific to the retirement liability.
The estimated future cost of restoration is reviewed annually and adjusted as appropriate.
−Removed: As of December 31, 2020, asset retirement obligation was $ 240 included in other liabilities.
−Removed: Property and Equipment
−Removed: Property and equipment, net consisted of the following:
+Added: As of December 31, 2021, asset retirement obligation was $ 0.2 million included in other liabilities.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Property, Plant and Equipment
+Added: Property, plant and equipment, net consisted of the following:
As of December 31,
+Added: (In thousands)
Furniture and fixtures $ 2,341 $ 2,240
5 unchanged sentences
Automobile 502 616
+Added: Land — 17,269
Total cost 97,725 139,336
Less—accumulated depreciation ( 46,080 ) ( 69,732 )
−Removed: Total property and equipment, net $ 41,654 $ 51,645
+Added: Total property, plant and equipment, net $ 51,645 $ 69,604
The Company capitalizes the costs to design software for internal use related to the development of its platform during the application development stage of the projects.
4 unchanged sentences
Costs incurred prior to the application development stage, maintenance activities or minor upgrades are expensed in the period incurred.
−Removed: Unamortized software development costs were approximately $ 5,746 and $ 5,957 as of December 31, 2019 and 2020, respectively.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: The Company capitalized $ 2,028 , $ 3,612 and $ 2,319 of software development costs for the years ended December 31, 2018, 2019 and 2020, respectively.
−Removed: Amortization expense related to capitalized software development costs were $ 1,482 , $ 2,024 , and $ 1,963 for the years ended December 31, 2018, 2019 and 2020, respectively.
−Removed: As of December 31, 2020, unamortized implementation costs related to cloud computing arrangements are $ 572 , of which $ 144 are included in prepaid expenses and other current assets and $ 429 are included in other long-term assets.
−Removed: The Company leases automobiles under leases accounted for as finance leases with expiration dates ranging from December 31, 2021 to April 30, 2025.
−Removed: As of December 31, 2020, cost and accumulated depreciation of the assets under finance leases recorded by the Company were $ 492 and $ 28 , respectively.
−Removed: There were no finance leases as of December 31, 2019.
−Removed: The Company recognized an impairment of $ 158 , $ 275 , and $ 227 during the years ended December 31, 2018, 2019 and 2020, respectively, related to capitalized software development costs that provided no future benefit and therefore were impaired.
+Added: Unamortized software development costs were approximately $ 6.0 million and $ 7.5 million as of December 31, 2020 and 2021, respectively.
+Added: The Company capitalized $ 3.6 million, $ 2.3 million, and $ 3.9 million of software development costs for the years ended December 31, 2019, 2020 and 2021, respectively.
+Added: Amortization expense related to capitalized software development costs $ 2.0 million, $ 2.0 million, and $ 1.8 million for the years ended December 31, 2019, 2020 and 2021, respectively.
+Added: As of December 31, 2021, unamortized implementation costs related to cloud computing arrangements are $ 0.4 million, of which $ 0.1 million are included in prepaid expenses and other current assets and $ 0.3 million are included in other long-term assets.
+Added: The Company leases automobiles under leases accounted for as finance leases with expiration dates ranging from February 28, 2022 to June 30, 2025.
+Added: As of December 31, 2020, cost and accumulated depreciation of the assets under finance leases recorded by the Company were $ 0.5 million and less than $0.1 million, respectively.
+Added: As of December 31, 2021, cost and accumulated depreciation of the assets under finance leases recorded by the Company were $ 0.6 million and $ 0.2 million, respectively.
+Added: The Company recognized an impairment of $ 0.3 million, $ 0.2 million, and $ 0.5 million during the years ended December 31, 2019, 2020 and 2021, respectively, related to capitalized software development costs that provided no future benefit and therefore were impaired.
This expense is reflected within cost of revenue in the accompanying consolidated statements of operations.
+Added: Notes to Consolidated Financial Statements (continued)
The Company recognized depreciation expense, which includes amortization of capitalized software development costs, as follows:
1 unchanged sentence
2019 2020 2021
+Added: (In thousands)
Cost of revenue $ 6,583 $ 9,536 $ 12,051
3 unchanged sentences
Total depreciation expense $ 9,018 $ 13,137 $ 17,523
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: Notes to Consolidated Financial Statements (continued)
Goodwill and Intangible Assets
The changes in carrying amount of goodwill were as follows:
+Added: (In thousands)
Balance as of December 31, 2019 $ 6,867
2 unchanged sentences
Balance as of December 31, 2020 372,239
+Added: Measurement period adjustment 999
+Added: Impact of foreign currency translation ( 28,815 )
+Added: Balance as of December 31, 2021 $ 344,423
Intangible Assets
3 unchanged sentences
Value Amortization
−Removed: Dash acquisition and other intangibles:
+Added: (In thousands) (In years)
Customer relationships $ 166,955 $ ( 6,850 ) $ 160,105 15 - 20
+Added: Developed technology 89,439 ( 2,253 ) 87,186 10
Other, definite lived 3,158 ( 3,158 ) — 2 - 7
5 unchanged sentences
Value Amortization
−Removed: Dash acquisition and other intangibles:
+Added: (In thousands) (In years)
Customer relationships $ 155,081 $ ( 16,861 ) $ 138,220 15 - 20
+Added: Developed technology 82,548 ( 10,315 ) 72,233 10
Other, definite lived 3,158 ( 3,158 ) — 2 - 7
Licenses, indefinite lived 764 — 764 Indefinite
−Removed: Total Dash acquistion and other intangible assets 15,093 ( 9,044 ) 6,049
−Removed: Voxbone acquistion:
−Removed: Customer relationships 156,559 ( 1,739 ) 154,820 15
−Removed: Developed technology 88,664 ( 1,478 ) 87,186 10
−Removed: Total Voxbone acquisition 245,223 ( 3,217 ) 242,006
−Removed: Total intangibles, net $ 260,316 $ ( 12,261 ) $ 248,055
−Removed: Amortization expense for definite lived intangible assets was $ 554 , $ 520 , $ 3,666 for the years ended December 31, 2018, 2019 and 2020 respectively.
+Added: Total intangible assets, net $ 241,551 $ ( 30,334 ) $ 211,217
+Added: Notes to Consolidated Financial Statements (continued)
+Added: The Company recognized amortization expense as follows:
+Added: Year ended December 31,
+Added: 2019 2020 2021
+Added: (In thousands)
+Added: Cost of revenue $ — $ 1,445 $ 8,543
+Added: General and administrative 520 2,221 10,576
+Added: Total amortization expense $ 520 $ 3,666 $ 19,119
The remaining weighted average amortization period for definite lived intangible assets is 12 years.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
Future estimated amortization expense for definite lived intangible assets is as follows:
As of December 31,
+Added: (In thousands)
2022 $ 18,344
1 unchanged sentence
Revolving Loan
−Removed: On March 1, 2019, the Company amended and restated its Credit and Security Agreement with KeyBank National Association (“KeyBank”).
−Removed: The agreement is for a $ 25,000 revolving loan, which includes a swing line of up to $ 1,000 and limits letters of credit commitments to a maximum of $ 2,500 .
−Removed: The term of the amended and restated Credit and Security Agreement is 3 years and matures on March 1, 2022.
−Removed: Loans under the Credit Agreement will bear interest at the highest of (i) the bank’s prime rate, (ii) the federal funds effective rate plus 0.5 percent, and (iii) the London Interbank Offered Rate plus 1.00 percent.
−Removed: This agreement requires that a specified minimum liquidity amount must be maintained in cash and cash equivalents at all times and that the Company meet a minimum revenue clause on a quarterly basis.
−Removed: On June 4, 2019, KeyBank and Pacific Western Bank entered into an Assignment and Acceptance Agreement, whereby KeyBank, as the Assignor, sold and assigned $ 10,000 of the Company's Revolving Credit Commitment to Pacific Western Bank, the Assignee.
−Removed: KeyBank retains $ 15,000 of the Revolving Credit Commitment.
−Removed: On February 25, 2020, the Company entered into a waiver agreement with respect to its revolving loan (the “Credit Facility”) with KeyBank National Association and Pacific Western Bank (the “Lenders”), which provided for consent to accommodate the issuance of the Convertible Notes and entry into the Capped Calls (as defined below).
−Removed: The waiver agreement (“Cash Collateral Requirement”) required the Company to covenant with the Lenders to deposit an amount of funds into a controlled account, which restricted the ability to use such funds until the Credit Facility was paid in full or terminated.
−Removed: If the Company had failed to comply with these covenants or to make payments under its indebtedness when due, the Company would have been in default under that indebtedness, which could, in turn, have resulted in that indebtedness becoming immediately payable in full.
−Removed: On April 27, 2020, the First Amendment Agreement to the Credit Security Agreement was executed in which the Lenders consented to remove the cash collateral requirement and to terminate the controlled account.
−Removed: As of December 31, 2019, unamortized debt issuance costs were $ 125 , of which $ 70 were in included in prepaid expenses and other current assets and $ 55 were included in other long-term assets.
−Removed: As of December 31, 2020, the outstanding debt issuance costs are $ 83 , of which $ 74 are included in prepaid expenses and other current assets and $ 9 are included in other long-term assets.
−Removed: As of December 31, 2019 and December 31, 2020, the Company had $ 0 outstanding on the Credit Facility and was in compliance with all financial and non-financial covenants for all periods presented.
−Removed: The available borrowing capacity under the Credit Facility was $ 25,000 as of December 31, 2020.
+Added: On May 25, 2021, the Company terminated the Credit and Security Agreement, dated as of November 4, 2016 as amended and restated as of March 1, 2019, among the Company, Key Bank National Association, and KeyBanc Capital Markets Inc.
+Added: (the “Credit Agreement”).
+Added: The agreement provided for a secured $ 25 million revolving credit facility (the “Credit Facility”).
+Added: As of December 31, 2020 and at the date of termination, no outstanding indebtedness existed under the Credit Facility and the Company was in compliance with all financial and non-financial covenants.
+Added: As of December 31, 2020, unamortized debt issuance costs were $ 0.1 million, of which were included in prepaid expenses and other current assets, and other long-term assets.
+Added: As of December 31, 2021, there were no outstanding debt issuance costs.
Convertible Senior Notes and Capped Call Transactions
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: On February 28, 2020, the Company issued $ 400,000 aggregate principal amount of 0.25 % Convertible Notes due March 1, 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the “Convertible Notes”).
+Added: 2026 Convertible Notes
+Added: On February 28, 2020, the Company issued $ 400 million aggregate principal amount of 0.25 % Convertible Notes due March 1, 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Securities Act (the “2026 Convertible Notes”).
The interest on the 2026 Convertible Notes is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2020.
1 unchanged sentence
The 2026 Convertible Notes will mature on March 1, 2026, unless earlier repurchased, redeemed by the Company, or converted pursuant to their terms.
−Removed: The total net proceeds from the Convertible Notes, after deducting initial purchaser discounts, costs related to the Capped Calls, and debt issuance costs, paid by the Company, were approximately $ 344,722 .
+Added: The total net proceeds from the 2026 Convertible Notes, after deducting initial purchaser discounts, costs related to the 2026 Capped Calls (as defined herein), and debt issuance costs, paid by the Company, were approximately $ 344.7 million.
Each $0.001 principal amount of the 2026 Convertible Notes is initially convertible into 10.9857 shares of the Company's Class A common stock, par value $ 0.001 per share, which is equivalent to an initial conversion price of approximately $ 91.03 per share.
1 unchanged sentence
In addition, upon the occurrence of a make-whole fundamental change, as defined in the 2026 Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2026 Convertible Notes in connection with such make-whole fundamental change or during the relevant redemption period.
−Removed: The Convertible Notes will be redeemable in whole or in part at the Company's option on or after March 6, 2023, but before the 40th scheduled trading day before the maturity date, at a cash redemption price equal to 100 % of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, if the last reported sale price of the Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the redemption notices were sent;
+Added: The 2026 Convertible Notes will be redeemable in whole or in part at the Company's option on or after March 6, 2023, but before the fortieth ( 40 th ) scheduled trading day before the maturity date, at a cash redemption price equal to 100 % of the principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, if the last reported sale price of the Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the redemption notices were sent;
and the trading day immediately before such notices were sent.
5 unchanged sentences
On or after September 1, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2026 Convertible Notes may, at their option, convert all or a portion of their 2026 Convertible Notes regardless of the foregoing conditions.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: During the year ended December 31, 2020, the conditional conversion feature of the Notes was triggered as the last reported sale price of the Company's Class A common stock was more than or equal to 130 % of the conversion price for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on or after June 30, 2020 (the last trading day of the calendar quarter), and therefore the Notes were convertible, in whole or in part, at the option of the holders between July 1, 2020 through December 31, 2020.
−Removed: Whether the Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future.
−Removed: The Company continues to classify the Notes as a long-term liability in its consolidated balance sheet as of December 31, 2020, based on contractual settlement provisions.
+Added: Prior to and during the nine months ended September 20, 2021, the conditional conversion feature of the 2026 Convertible Notes was triggered as the last reported sale price of the Company's Class A common stock was
+Added: Notes to Consolidated Financial Statements (continued)
+Added: more than or equal to 130 % of the conversion price for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on or after June 30, 2020 (the last trading day of the calendar quarter), and therefore the 2026 Convertible Notes were convertible, in whole or in part, at the option of the holders between July 1, 2020 through September 30, 2021.
+Added: The conditional conversion feature of the 2026 Convertible Note was not triggered from October 1, 2021 through December 31, 2021 as the last reported sale price of the Company's Class A common stock was not more than or equal to 130 % of the conversion price for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days (the last trading day of the calendar quarter).
+Added: Whether the 2026 Convertible Notes will be convertible following such period will depend on the satisfaction of this condition or another conversion condition in the future.
+Added: The Company continues to classify the 2026 Convertible Notes as a long-term liability in its consolidated balance sheet as of December 31, 2021, based on contractual settlement provisions.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A common stock, or a combination of cash and shares of Class A common stock, at the Company's election.
2 unchanged sentences
Upon the occurrence of a fundamental change (as defined in the 2026 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2026 Convertible Notes for cash at a price equal to the principal amount of the 2026 Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
−Removed: The Convertible Notes are the senior, unsecured obligations of the Company and are equal in right of payment with the Company’s existing and future senior unsecured indebtedness, senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Convertible Notes and effectively subordinated to the Company’s existing and future senior secured indebtedness (including the Company’s $ 25,000 Credit Facility), to the extent of the value of the collateral securing that indebtedness.
−Removed: The Convertible Notes will be structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and preferred equity, if any, of the Company’s subsidiaries.
In accounting for the issuance of the 2026 Convertible Notes, the Company separated the 2026 Convertible Notes into liability and equity components.
The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature.
−Removed: The carrying amount of the equity component representing the conversion option was $ 125,152 and was determined by deducting the fair value of the liability component from the par value of the Convertible Notes.
+Added: The carrying amount of the equity component representing the conversion option was $ 125.2 million and was determined by deducting the fair value of the liability component from the par value of the 2026 Convertible Notes.
The difference represents the debt discount that is amortized to interest expense at an effective interest rate of 6.763 % over the term of the 2026 Convertible Notes.
−Removed: The carrying amount of the equity component was $ 57,485 and is recorded in additional paid-in-capital.
+Added: The carrying amount of the equity component was $ 57.5 million and is recorded in additional paid-in-capital.
The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
1 unchanged sentence
In accounting for the transaction costs related to the 2026 Convertible Notes, the Company allocated the total amount incurred to the liability and equity components of the 2026 Convertible Notes based on the proportion of the proceeds allocated to the debt and equity components.
−Removed: Issuance costs attributable to the liability component were approximately $ 8,217 , were recorded as an additional debt discount and are amortized to interest expense using the effective interest method over the contractual terms of the Convertible Notes.
−Removed: Issuance costs attributable to the equity component of $ 3,742 were netted with the equity component in stockholders’ equity.
−Removed: The net carrying amount of the liability component of the Convertible Notes was as follows:
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: Issuance costs attributable to the liability component were approximately $ 8.2 million, were recorded as an additional debt discount and are amortized to interest expense using the effective interest method over the contractual terms of the 2026 Convertible Notes.
+Added: Issuance costs attributable to the equity component of $ 3.7 million were netted with the equity component in stockholders’ equity.
+Added: 2028 Convertible Notes
+Added: On March 16, 2021, the Company issued $ 250 million aggregate principal amount of 0.50 % Convertible Notes due April 1, 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the “2028 Convertible Notes and, together with the 2026 Convertible Notes, the “Convertible Notes”).
+Added: The interest on the 2028 Convertible Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: The 2028 Convertible Notes may bear special interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the indenture governing the 2028 Convertible Notes (the “2028 Indenture”) or if the 2028 Convertible Notes are not freely tradeable as required by the 2028 Indenture.
+Added: The 2028 Convertible Notes will mature on April 1, 2028, unless earlier repurchased, redeemed by the Company, or converted pursuant to their terms.
+Added: The total net proceeds from the 2028 Convertible Notes, after deducting initial purchaser discounts, costs related to the 2028 Capped Calls (as defined herein), and debt issuance costs, paid by the Company, were approximately $ 217 million.
+Added: Each $0.001 principal amount of the 2028 Convertible Notes is initially convertible into 5.5781 shares of the Company's Class A common stock, par value $ 0.001 per share, which is equivalent to an initial conversion price of approximately $ 179.27 per share.
+Added: The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest.
+Added: In addition, upon the occurrence of a make-whole fundamental change, as defined in the 2028 Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2028 Convertible Notes in connection with such make-whole fundamental change or during the relevant redemption period.
+Added: The 2028 Convertible Notes will be redeemable in whole or in part at the Company's option on or after April 6, 2025, but before the fortieth (40 th ) scheduled trading day before the maturity date, at a cash redemption price equal to 100 % of the principal amount of the 2028 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, if the last reported sale price of the Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the redemption notices were sent;
+Added: and the trading day immediately before such notices were sent.
+Added: On or after April 6, 2025 until the close of business on the scheduled trading day immediately preceding the maturity date, the 2028 Convertible Notes may be convertible at the option of the holders only under the following circumstances:
+Added: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price per share of the Company's Class A common stock exceeds 130 % of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
+Added: (2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $0.001 principal amount of 2028 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company's Class A common stock on such trading day and the conversion rate on such trading day;
+Added: (3) upon the occurrence of certain corporate events or distributions on its Class A common stock;
+Added: (4) if the Company calls such 2028 Convertible Notes for redemption.
+Added: On or after October 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2028 Convertible Notes may, at their option, convert all or a portion of their Convertible Notes regardless of the foregoing conditions.
+Added: Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A common stock, or a combination of cash and shares of Class A common stock, at the Company's election.
+Added: It is the Company's current intent to settle the principal amount of the 2028 Convertible Notes with cash.
+Added: Notes to Consolidated Financial Statements (continued)
+Added: No sinking fund is provided for the 2028 Convertible Notes.
+Added: Upon the occurrence of a fundamental change (as defined in the 2028 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2028 Convertible Notes for cash at a price equal to the principal amount of the 2028 Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
+Added: In accounting for the issuance of the 2028 Convertible Notes, the Company separated the 2028 Convertible Notes into liability and equity components.
+Added: The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature.
+Added: The carrying amount of the equity component representing the conversion option was $ 66.9 million and was determined by deducting the fair value of the liability component from the par value of the 2028 Convertible Notes.
+Added: The difference represents the debt discount that is amortized to interest expense at an effective interest rate of 5.125 % over the term of the 2028 Convertible Notes.
+Added: The carrying amount of the equity component was $ 39.4 million and is recorded in additional paid-in-capital.
+Added: The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
+Added: The excess of the principal amount of the liability component over its carrying amount, or the debt discount, is amortized to interest expense at an annual effective interest rate of 4.959 % over the contractual terms of the 2028 Convertible Notes.
+Added: In accounting for the transaction costs related to the 2028 Convertible Notes, the Company allocated the total amount incurred to the liability and equity components of the 2028 Convertible Notes based on the proportion of the proceeds allocated to the debt and equity components.
+Added: Issuance costs attributable to the liability component were approximately $ 5.5 million, were recorded as an additional debt discount and are amortized to interest expense using the effective interest method over the contractual terms of the 2028 Convertible Notes.
+Added: Issuance costs attributable to the equity component of $ 2.0 million were netted with the equity component in stockholders’ equity.
+Added: The net carrying amount of the liability components of the 2026 and 2028 Convertible Notes were as follows:
As of December 31,
+Added: 2026 Convertible Notes:
+Added: (In thousands)
Principal $ 400,000 $ 400,000
1 unchanged sentence
Unamortized debt issuance costs ( 7,258 ) ( 6,043 )
−Removed: Net carrying amount $ 282,196
−Removed: The net carrying amount of the equity component of the Convertible Notes was as follows:
+Added: 2026 Convertible Notes net carrying amount $ 282,196 $ 301,923
+Added: 2028 Convertible Notes:
+Added: Principal $ — $ 250,000
+Added: Unamortized discount — ( 60,488 )
+Added: Unamortized debt issuance costs — ( 4,995 )
+Added: 2028 Convertible Notes net carrying amount $ — $ 184,517
+Added: Total net carrying amount $ 282,196 $ 486,440
+Added: Notes to Consolidated Financial Statements (continued)
+Added: The net carrying amount of the equity components of the 2026 and 2028 Convertible Notes were as follows:
As of December 31,
+Added: 2026 Convertible Notes:
+Added: (In thousands)
Proceeds allocated to the conversion options (debt discount) $ 125,152 $ 125,152
Issuance costs ( 3,742 ) ( 3,742 )
−Removed: Net carrying amount $ 121,410
−Removed: The following table sets forth the interest expense recognized related to the Convertible Notes:
+Added: 2026 Convertible Notes net carrying amount $ 121,410 $ 121,410
+Added: 2028 Convertible Notes:
+Added: Proceeds allocated to the conversion options (debt discount) $ — $ 66,908
+Added: Issuance costs — ( 2,019 )
+Added: 2028 Convertible Notes net carrying amount $ — $ 64,889
+Added: Total net carrying amount $ 121,410 $ 186,299
+Added: The following table sets forth the interest expense recognized related to the 2026 and 2028 Convertible Notes:
Year ended December 31,
+Added: 2026 Convertible Notes:
+Added: (In thousands)
Contractual interest expense $ 841 $ 1,000
2 unchanged sentences
Total interest expense related to the 2026 Convertible Notes $ 16,406 $ 20,719
−Removed: In connection with the offering of the Convertible Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “Capped Calls”).
−Removed: The Capped Calls each have an initial strike price of approximately $ 91.03 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Notes.
−Removed: The Capped Calls have initial cap prices of $ 137.40 per share, subject to certain adjustments.
−Removed: The Capped Calls cover, subject to anti-dilution adjustments, approximately 4,394,276 shares of Class A common stock.
−Removed: The Capped Calls are generally intended to reduce or offset the potential dilution to the Class A common stock upon any conversion of the Convertible Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.
−Removed: The Capped Calls expire on the earlier of (i) the last day on which any convertible securities remain outstanding and (ii) March 1, 2026, subject to earlier exercise.
+Added: 2028 Convertible Notes:
+Added: Contractual interest expense $ — $ 991
+Added: Amortization of debt discount — 6,419
+Added: Amortization of debt issuance costs — 532
+Added: Total interest expense related to the 2028 Convertible Notes $ — $ 7,942
+Added: Total interest expense $ 16,406 $ 28,661
+Added: In connection with the offering of the 2026 Convertible Notes and the 2028 Convertible Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “2026 Capped Calls” and the “2028 Capped Calls,” respectively and, collectively, the “Capped Calls”).
+Added: The 2026 Capped Calls and the 2028 Capped Calls each have an initial strike price of approximately $ 91.03 and $ 179.27 per share, respectively, subject to certain adjustments, which corresponds to the initial conversion price of the 2026 Convertible Notes and the 2028 Convertible Notes.
+Added: The 2026 Capped Calls and the 2028 Capped Calls have initial cap prices of $ 137.40 and $ 260.76 per share subject to certain adjustments, respectively.
+Added: The 2026 Capped Calls and the 2028 Capped Calls cover, subject to anti-dilution adjustments, approximately 4,394,276 and 1,394,525 shares of Class A common stock for the 2026 Convertible Notes and 2028 Convertible Notes, respectively.
+Added: The Capped Calls are generally intended to reduce or offset the potential dilution to the Class A common stock upon any conversion of the 2026 Convertible Notes and 2028 Convertible Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.
+Added: The Capped Calls expire on the earlier of (i) the last day on which
+Added: Notes to Consolidated Financial Statements (continued)
+Added: any convertible securities remain outstanding and (ii) March 1, 2026 for the 2026 Capped Calls and April 1, 2028 for the 2028 Capped Calls, subject to earlier exercise.
The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event, a tender offer, and a nationalization, insolvency or delisting involving the Company.
1 unchanged sentence
The Capped Call transactions are recorded in stockholders’ equity and are not accounted for as derivatives.
−Removed: The net cost of $ 43,320 incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheets.
+Added: The net cost of $ 43.3 million and $ 25.5 million incurred to purchase the 2026 Capped Calls and the 2028 Capped Calls, respectively, was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheets.
+Added: The Convertible Notes are effectively subordinated to the Company’s future senior secured indebtedness, if any, to the extent of the value of the collateral securing that indebtedness.
+Added: The Convertible notes are the senior, unsecured obligations of the Company and are equal in right of payment with the Company’s future senior unsecured indebtedness, if any, senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Convertible Notes and the Convertible Notes will be structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and preferred equity, if any, of the Company’s subsidiaries.
Segment and Geographic Information
6 unchanged sentences
Therefore, no segment asset information is reported.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
Year ended December 31,
2019 2020 2021
+Added: (In thousands)
Revenue $ 197,944 $ 298,090 $ 413,948
8 unchanged sentences
The Company’s long-lived assets were primarily held in the United States as of December 31, 2020 and December 31, 2021.
−Removed: As of December 31, 2019 and December 31, 2020, long-lived assets held outside of the United States were $ 2,924 and $ 11,249 , respectively.
+Added: As of December 31, 2020 and December 31, 2021, long-lived assets held outside of the United States were $ 11.2 million and $ 9.2 million, respectively.
+Added: Notes to Consolidated Financial Statements (continued)
The Company generates its revenue primarily in the United States.
2 unchanged sentences
2019 2020 2021
+Added: (In thousands)
United States $ 192,506 $ 281,757 $ 364,412
9 unchanged sentences
As of December 31, 2020, 22,413,004 and 2,496,125 shares of Class A common stock and Class B common stock, respectively, were issued and outstanding.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
As of December 31, 2021, 23,177,988 and 1,965,170 shares of Class A common stock and Class B common stock, respectively, were issued and outstanding.
4 unchanged sentences
During the years ended December 31, 2019, 2020 and 2021, no dividends were declared.
−Removed: Dividend payments are subject to a restriction by the Company’s Credit and Security Agreement prohibiting the Company to pay any dividends or any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock through the term of the agreement.
+Added: Dividend payments are not subject to restriction.
+Added: Notes to Consolidated Financial Statements (continued)
Reserved Shares
8 unchanged sentences
As of July 26, 2010, the Company adopted the 2010 Equity Compensation Plan (the “2010 Plan”).
−Removed: Eligible plan participants include employees, directors and consultants.
−Removed: The 2010 Plan permits the granting of incentive stock options and non-qualified stock options.
On November 9, 2017, the 2010 Plan was terminated in connection with the Company’s initial public offering.
4 unchanged sentences
The 2017 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, dividend equivalents, restricted stock units, and other stock or cash based awards to employees, consultants and directors of the Company.
−Removed: A total of 1,050,000 shares of the Company’s
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: Class A common stock were originally reserved for issuance under the 2017 Plan.
+Added: A total of 1,050,000 shares of the Company’s Class A common stock were originally reserved for issuance under the 2017 Plan.
These available shares automatically increase each January 1, beginning on January 1, 2018, by 5 % of the number of shares of the Company’s Class A common stock outstanding on the final day of the immediately preceding calendar year.
−Removed: On January 1, 2020, the shares available for grant under the 2017 Plan were automatically increased by 929,224 shares for a total of 2,239,578 .
+Added: On January 1, 2021, the shares available for grant under the 2017 Plan were automatically increased by 1,120,650 shares.
The terms of the stock option grants are determined by the Company’s Board of Directors.
1 unchanged sentence
The stock options have a contractual life of ten years .
−Removed: Restricted stock units (“RSUs”) granted under the 2017 Plan are subject to a time-based vesting condition.
+Added: Restricted stock units (“RSUs”) granted under the 2017 Plan are generally subject to a time-based vesting condition.
The compensation expense related to these awards is based on the grant date fair value of the RSUs and is recognized on a ratable basis over the applicable service period.
−Removed: The Company granted RSUs to its non-employee Board of Directors, some of which vested immediately while others vest 25 % as of each calendar quarter immediately following the grant date.
+Added: The Company granted RSUs to its non-employee members of the Board of Directors, some of which vested immediately while others vest 25 % as of each calendar quarter immediately following the grant date.
Certain RSUs awarded to executives vest over four years with 50 % vesting in the first year in 12.5 % increments on each calendar quarter immediately following the grant date and the remaining 50 % earned over years two, three and four.
Other RSUs awarded to executives and employees generally are earned over a service period of four years .
+Added: Notes to Consolidated Financial Statements (continued)
Stock Options
−Removed: The following summarizes the stock option activity for the periods presented:
+Added: The following summarizes the stock option activity for the period presented:
outstanding Weighted-
11 unchanged sentences
Options vested and expected to vest as of December 31, 2021 180,209 $ 10.14 3.39 $ 11,104
+Added: Year ended December 31,
+Added: 2019 2020 2021
+Added: (In thousands)
+Added: Aggregate intrinsic value of stock options exercised $ 57,159 $ 54,088 $ 9,297
+Added: Total estimated grant date fair value of options vested 729 416 247
Aggregate intrinsic value is computed based on the difference between the option exercise price and the fair value of the Company’s common stock as of December 31, 2021, based on the Company’s Class A common stock price as reported on the NASDAQ Global Select Market.
No options were granted for the year ended December 31, 2021.
−Removed: The total estimated grant date fair value of options vested was $ 979 , $ 729 , and $ 416 for the years ended December 31, 2018, 2019 and 2020, respectively.
−Removed: As of December 31, 2020, total unrecognized compensation cost related to all non-vested stock options was $ 152 , which will be amortized over a weighted-average period of 0.66 years.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: As of December 31, 2021, the Company had no unrecognized compensation cost related to non-vested stock options.
+Added: All outstanding stock options are fully vested.
Restricted Stock Units
−Removed: The following summarizes the RSU activity for the periods presented:
+Added: The following summarizes the RSU activity for the period presented:
Number of awards outstanding Weighted-average grant date fair value (Per share)
4 unchanged sentences
Nonvested RSUs as of December 31, 2021 344,486 $ 82.38
−Removed: As of December 31, 2020, total unrecognized compensation cost related to non-vested RSUs was $ 18,319 , which will be amortized over a weighted-average period of 2.72 years.
+Added: As of December 31, 2021, total unrecognized compensation cost related to non-vested RSUs was $ 21.6 million, which will be amortized over a weighted-average period of 2.71 years.
+Added: Notes to Consolidated Financial Statements (continued)
Stock-Based Compensation Expense
2 unchanged sentences
2019 2020 2021
+Added: (In thousands)
Cost of revenue $ 211 $ 208 $ 252
3 unchanged sentences
Total $ 6,626 $ 9,881 $ 14,537
−Removed: ________________________
−Removed: (1) On December 21, 2018, the Company reached a separation agreement with an executive.
−Removed: The agreement resulted in a modification of the former employee ’ s 17,725 non-vested restricted stock units, which accelerated the vesting period, resulting in the recognition of $ 535 of additional stock compensation expense for the year ended December 31, 2018.
Commitments and Contingencies
4 unchanged sentences
On October 25, 2015, the Company entered into an agreement with a telecommunications service provider.
−Removed: The service agreement requires the Company to pay a monthly recurring charge beginning on January 1, 2016 associated with the services received.
−Removed: The service agreement is non-cancellable and contains annual minimum commitments of $ 1,200 , to be fulfilled over five years or for as long as the Company continues to receive services from this vendor.
−Removed: On August 1, 2020, the Company amended the agreement to require annual minimum commitments of $ 600 and $ 300 in 2021 and 2022, respectively.
−Removed: In addition, as of December 31, 2020, the Company has $ 13,378 in other non-cancellable purchase obligations, consisting of primarily network equipment maintenance and software license contracts, of which $ 8,428 will be fulfilled within one year.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: On May 16, 2020, the Company entered into an indemnity agreement with a development company (the “developer”) relating to predevelopment work for approximately 40 acres of vacant land in Raleigh, North Carolina, currently owned by the State of North Carolina (the “State”), upon which the Company intends to construct its office headquarters.
−Removed: The indemnity agreement requires the Company to reimburse the developer one-half of the predevelopment work expenses plus two-thirds of a near future amount to be incurred, to a maximum of $ 597 , if certain conditions are not satisfied.
−Removed: As of December 31, 2020, the Company expects all of the required conditions to be satisfied.
−Removed: On June 15, 2020, the Company signed a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with the State regarding the proposed sale to Bandwidth of the approximately 40 acres of vacant land located at the southwest quadrant of Reedy Creek Road and Edwards Mill Road in Raleigh, North Carolina (the “Land”).
−Removed: The consideration for the proposed sale of the Land to Bandwidth is $ 30,000 .
−Removed: As part of the purchase and Sale Agreement, the Company is obligated to provide and improve parking facilities for the use by the State of NC which were previously located on the Land.
−Removed: The Purchase and Sale Agreement is subject to due diligence, approvals and other customary closing conditions.
+Added: The service agreement requires the Company to pay a monthly recurring charge associated with the services received.
+Added: The service agreement is non-cancellable and contains annual minimum commitments.
+Added: On August 1, 2020, the Company amended the agreement to require annual minimum commitments of $ 0.6 million and $ 0.3 million in 2021 and 2022, respectively.
+Added: In addition, as of December 31, 2021, the Company has $ 18.1 million in other non-cancellable purchase obligations, consisting of primarily network equipment maintenance and software license contracts, of which $ 13.2 million will be fulfilled within one year.
+Added: On May 27, 2021, the Company entered into the Lease with the Developer for the Conveyed Parcel, together with the Project.
+Added: The respective obligations of the Company and the Developer under the Lease were conditioned upon the Developer acquiring fee simple title to the Conveyed Parcel, which occurred on June 4, 2021.
+Added: The Lease term will commence upon the Commencement Date and continue for the Initial Term.
+Added: It is anticipated that the Commencement Date will occur in May 2023.
+Added: If the Commencement Date does not occur within one hundred twenty ( 120 ) days from the scheduled Commencement Date, the Company shall be entitled to certain rent abatements, as described in the Lease.
+Added: If the Commencement Date is not delivered within twelve ( 12 ) months of the scheduled Commencement Date, the Company may terminate the Lease.
+Added: The Company has the option to renew the Initial Term for two ten-year periods.
+Added: Base rent payments will begin on the Commencement Date.
+Added: The initial base rent will increase by 1.85 % on each anniversary of the Commencement Date.
+Added: Total lease payments over the Initial Term are approximately $ 495.7 million.
+Added: See Note 6, “Right-of-Use Asset and Lease Liabilities” to the consolidated financial statements, for additional details on the Company's operating lease commitments.
+Added: On December 7, 2021, the Company entered into a non-cancelable operating lease agreement for its London, UK, facilities.
+Added: The lease term commenced on January 1, 2022 and will continue for the initial term of 24 months.
+Added: Total lease payments over the initial term are approximately $ 3.6 million.
+Added: The lease will automatically renew on a month by month basis after the initial lease term.
+Added: Notes to Consolidated Financial Statements (continued)
Legal Matters
−Removed: The Company is involved as a defendant in various lawsuits alleging that the Company failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services pursuant to applicable laws in various jurisdictions.
+Added: The Company is involved as a defendant in various litigation, including, but not limited to, lawsuits alleging that the Company failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services pursuant to applicable laws in various jurisdictions.
While the results of these legal proceedings cannot be predicted with certainty, in the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: Employee Benefit Plan
+Added: Employee Benefit Plans
The Company sponsors a U.S.
2 unchanged sentences
With the acquisition of Voxbone S.A.
−Removed: on November 1, 2020, the Company assumed sponsorship for their U.S.
+Added: on November 1, 2020, the Company assumed sponsorship for Voxbone S.A.’s U.S.
defined contribution 401(k).
−Removed: The Company also assumed sponsorship for a non-U.S.
−Removed: defined contribution plan for which they pay fixed contributions into a separate entity.
+Added: In connection with that acquisition, the Company also assumed sponsorship for a non-U.S.
+Added: defined contribution plan for which it pays fixed contributions into a separate entity.
The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current or prior periods.
The contributions are recognized as employee benefit expense when they are due.
−Removed: The Company made matching contributions for the defined contribution plans of $ 1,117 , $ 1,731 , and $ 2,202 for the years ended December 31, 2018, 2019 and 2020, respectively.
−Removed: In addition, as a result of the acquisition of Voxbone S.A., the Company assumed sponsorship for their non-U.S.
+Added: The Company made matching contributions for the defined contribution plans of $ 1.7 million, $ 2.2 million, and $ 3.8 million for the years ended December 31, 2019, 2020 and 2021, respectively.
+Added: In addition, as a result of the acquisition of Voxbone S.A., the Company assumed sponsorship for Voxbone S.A.’s non-U.S.
defined benefit pension plans.
−Removed: The liability recognized in the balance sheet in respect to these plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of the plan assets.
+Added: The liability recognized is the present value of the defined benefit obligation at the end of the reporting period less the fair value of the plan assets and is included in other liabilities in the accompanying consolidated balance sheets.
The defined benefit obligation is calculated annually by an independent actuary using the Projected Unit Credit Method.
The following table summarizes information for the pension plans:
+Added: Notes to Consolidated Financial Statements (continued)
As of December 31,
+Added: (In thousands)
Change in benefit obligation:
2 unchanged sentences
Interest cost 3 21
−Removed: Actuarial loss 15
+Added: Actuarial loss (gain) 15 ( 237 )
Taxes, insurance premiums and administrative expenses ( 9 ) ( 55 )
Acquisitions/plan mergers 3,980 —
+Added: Impact of foreign currency translation — ( 315 )
Benefit obligation at end of year $ 4,064 $ 3,874
2 unchanged sentences
Return on plan assets 8 14
−Removed: Actuarial loss 2
+Added: Actuarial gain 2 6
Employer contribution 57 335
1 unchanged sentence
Taxes, insurance premiums and administrative expenses ( 9 ) ( 55 )
+Added: Impact of foreign currency translation — ( 224 )
Fair value of plan assets at end of year 2,882 2,958
Funded status, net liability $ 1,182 $ 916
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: The following table presents the balance sheet location of the Company’s pension liability:
+Added: The following table presents the balance sheet location of the Company’s pension liability for the Company’s non-U.S.
+Added: defined benefit pension plans:
As of December 31,
+Added: (In thousands)
Other liabilities $ 1,182 $ 916
−Removed: The accumulated benefit obligation for the Company's non-U.S.
−Removed: defined benefit pension plans was $ 3,450 as of December 31, 2020.
The following table summarizes information for the Company’s pension plans with an accumulated benefit obligation in excess of plan assets:
As of December 31,
+Added: (In thousands)
Projected benefit obligation $ 4,064 $ 3,874
2 unchanged sentences
The Company reports the service cost component of net periodic benefit cost in the same line item as other compensation costs arising from the services rendered by the employee and records the other components of net periodic benefit cost in other expense, net.
−Removed: Pretax amounts for net periodic benefit cost and other amounts included in other comprehensive income (loss) for the defined benefit pension plans consisted of the following components:
+Added: Notes to Consolidated Financial Statements (continued)
+Added: Pretax amounts for net periodic benefit cost and other amounts for the defined benefit pension plans consisted of the following components:
Year ended December 31,
+Added: (In thousands)
Service cost $ 75 $ 396
3 unchanged sentences
Changes in plan assets and benefit obligations included in other comprehensive income (loss):
−Removed: Change in net actuarial loss 17
−Removed: Total (before tax effect) 17
+Added: Unrecognized net actuarial loss beginning of year — 17
+Added: Actuarial loss (gain) on benefit obligation 15 ( 237 )
+Added: Actuarial loss (gain) on fair value of plan assets 2 ( 6 )
+Added: Impact of foreign currency translation — ( 1 )
+Added: Total included in other comprehensive income (loss) (before tax effect) 17 ( 227 )
Total recognized in net periodic benefit cost and included in other comprehensive income (loss) $ 87 $ 176
−Removed: The Company uses significant judgement to determine the measurement of their non-U.S.
+Added: The Company uses significant judgment to determine the measurement of their non-U.S.
defined benefit pension plans’ assets and liabilities.
2 unchanged sentences
Any change in these assumptions will impact the present value of the defined benefit obligation.
+Added: The actuarial gains and losses recognized in the pension expense are determined using the so-called “10% corridor” method, i.e.
+Added: actuarial gains and losses which exceed 10% of the higher of the plan assets and the projected benefit obligation are amortized on a straight line basis over the average remaining service period of the active plan participants.
+Added: Any prior service costs are amortized on a straight line basis over the average remaining service period of the active plan participants.
The Company determines the appropriate discount rate at the end of each year.
2 unchanged sentences
The other assumptions for pension obligations are based in part on market conditions.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: Notes to Consolidated Financial Statements (continued)
Significant assumptions used in determining benefit obligations and net periodic benefit cost are as follows:
17 unchanged sentences
As of December 31,
+Added: (In thousands)
Assets held by:
−Removed: Insurance companies (collective) $ 2,853
−Removed: Insurance companies (individual) 29
−Removed: Total $ 2,882
+Added: Insurance companies (collective and individual) $ 2,882 $ 2,958
Expected Cash Flows
−Removed: The Company expects to contribute $ 341 to its non-U.S.
+Added: The Company expects to contribute $ 0.3 million to its non-U.S.
defined benefit pension plans during 2022.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: Notes to Consolidated Financial Statements (continued)
The following table summarizes projected benefit payments from the Company’s pension plans through 2031, including benefits attributable to estimated future service:
As of December 31,
−Removed: The following table presents domestic and foreign components of income (loss) before income taxes for the tax years ended December 31, 2018, 2019 and 2020:
+Added: (In thousands)
+Added: The following table presents domestic and foreign components of loss before income taxes for the tax years ended December 31, 2019, 2020 and 2021:
Year Ended December 31,
2019 2020 2021
+Added: (In thousands)
United States $ ( 15,229 ) $ ( 25,745 ) $ ( 27,547 )
International 5 ( 3,227 ) ( 3,648 )
−Removed: Income (loss) before income taxes $ 7,053 $ ( 15,224 ) $ ( 28,972 )
+Added: Loss before income taxes $ ( 15,224 ) $ ( 28,972 ) $ ( 31,195 )
Benefit (provision) for income taxes from operations consists of the following:
1 unchanged sentence
2019 2020 2021
+Added: (In thousands)
Federal $ 81 $ 431 $ ( 2,713 )
7 unchanged sentences
Income tax benefit (provision) $ 17,718 $ ( 15,005 ) $ 3,833
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: Notes to Consolidated Financial Statements (continued)
The following table presents a reconciliation of the statutory federal tax rate and the Company's effective tax rate for the years ended December 31, 2019, 2020 and 2021:
8 unchanged sentences
Deferred tax rate change ( 0.3 ) 0.2 ( 0.2 )
+Added: Voxbone US 338(g) gain — — ( 8.9 )
+Added: Intangibles and deferred adjustments — — ( 40.2 )
+Added: Foreign rate differential — — 1.3
Other ( 1.6 ) 0.3 4.5
Total 116.4 % ( 51.8 ) % 12.3 %
−Removed: The following table presents the significant components of the Company’s net deferred tax assets:
+Added: Notes to Consolidated Financial Statements (continued)
+Added: The following table presents the significant components of the Company’s net deferred tax liability:
As of December 31,
+Added: (In thousands)
Deferred tax assets:
4 unchanged sentences
Stock-based compensation - deferred tax asset 1,968 2,278
+Added: OID 9,433 8,848
Tax credits 7,270 9,214
12 unchanged sentences
Total deferred tax liabilities 101,689 99,973
−Removed: Net deferred tax asset (liability) $ 34,861 $ ( 61,005 )
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
+Added: Net deferred tax liability $ ( 61,005 ) $ ( 48,396 )
The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets.
The Company primarily considered the historic performance of Bandwidth, the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible.
−Removed: Based on an analysis of these factors, the Company determined that in 2020 a valuation allowance against US and UK deferred tax assets was required.
−Removed: As of December 31, 2020, the Company had approximately $ 187,385 in US federal net operating loss carryforwards, $ 5,263 in UK loss carryforwards, and $ 9,653 in federal tax credits.
+Added: Based on an analysis of these factors, the Company maintained that in 2021 a valuation allowance against US deferred tax assets was required.
+Added: As of December 31, 2021, the Company had approximately $ 195.5 million in US federal net operating loss carryforwards, $ 5.6 million in UK loss carryforwards, and $ 9.2 million in federal tax credits.
All US federal net operating loss carryforwards were generated after the enactment of the Tax Cuts and Jobs Act (the “Act”) and as such do not expire, but can only be utilized to offset up to 80% of taxable income in any given year.
The federal tax credits start to expire at various dates beginning in 2032.
−Removed: As of December 31, 2020, the Company had approximately $ 125,334 in state net operating loss carryforwards.
+Added: As of December 31, 2021, the Company had approximately $ 138.1 million in state net operating loss carryforwards.
If not utilized, some state net operating loss carryforwards will expire at various dates beginning in 2023.
+Added: Notes to Consolidated Financial Statements (continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Year Ended December 31,
+Added: (In thousands)
Unrecognized tax benefits—January 1, $ 1,398 $ 2,414
Gross increases—tax positions in prior period 402 —
−Removed: Gross decreases—tax positions in prior period ( 15 ) —
Gross increases—tax positions in current period 614 648
Unrecognized tax benefits—December 31, $ 2,414 $ 3,062
−Removed: If the $ 2,414 of unrecognized tax benefit is recognized, it would not impact the effective tax rate.
+Added: If the $ 3.1 million of unrecognized tax benefit is recognized, it would not impact the effective tax rate due to the valuation allowance on the Company's net U.S.
+Added: deferred tax assets.
The Company has not incurred any material tax interest or penalties with respect to income taxes in the years ended December 31, 2020 and 2021 .
5 unchanged sentences
Related Parties
−Removed: On April 20, 2015, the Company created a wholly owned subsidiary, Republic, which was incorporated in Delaware.
−Removed: On November 30, 2016, the Company completed a pro-rata distribution of the common stock of Republic to its stockholders of record as of the close of business (the “Spin-Off”).
−Removed: In connection with the Spin-Off on November 30, 2016, the Company and Republic entered into certain agreements in order to govern the ongoing relationships between the two companies after the Spin-Off and to provide for an orderly transition.
+Added: On April 20, 2015, the Company created a wholly owned subsidiary, Relay, Inc.
+Added: (f/k/a Republic Wireless, Inc.) (“Relay”), which was incorporated in Delaware.
+Added: On November 30, 2016, the Company completed a pro-rata distribution of the common stock of Relay to its stockholders of record as of the close of business (the “Spin-Off”).
+Added: In connection with the Spin-Off on November 30, 2016, the Company and Relay entered into certain agreements in order to govern the ongoing relationships between the two companies after the Spin-Off and to provide for an orderly transition.
The agreements include a Transition Services Agreement, Facilities Sharing Agreement, Tax Sharing Agreement, and Master Services Agreement.
−Removed: The equity holders of Bandwidth pre-initial public offering are comprised of substantially the same individuals and entities that are the equity owners of Republic.
−Removed: The Company has determined the equity owners of Republic are related parties of Bandwidth.
−Removed: The Company has certain involvement with Republic via ongoing services arrangements, with these ongoing services arrangements creating a variable interest in Republic.
−Removed: The Company assessed the relationship with Republic under guidance for variable interest entities (“VIE”).
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: investors in Republic have disproportionate voting rights, the Company concluded that Republic is a VIE, but Bandwidth is not a primary beneficiary.
−Removed: The Company’s maximum exposure to loss relating to this VIE is limited to amounts due under the service agreements between the Company and Republic.
−Removed: The Company recorded a reduction of rent expense under the Facilities Sharing Agreement of $ 1,005 , $ 643 , and $ 384 for the years ended December 31, 2018, 2019 and 2020 respectively, which is included in general and administrative expenses in the consolidated statements of operations.
+Added: The equity holders of Bandwidth pre-initial public offering are comprised of substantially the same individuals and entities that are the equity owners of Relay.
+Added: The Company has determined the equity owners of Relay are related parties of Bandwidth.
+Added: The Company has certain involvement with Relay via ongoing services arrangements, with these ongoing services arrangements creating a variable interest in Relay.
+Added: The Company assessed the relationship with Relay under guidance for variable interest entities (“VIE”).
+Added: Because investors in Relay have disproportionate voting rights, the Company concluded that Relay is a VIE, but Bandwidth is not a primary beneficiary.
+Added: The Company’s maximum exposure to loss relating to this VIE is limited to amounts due under the service agreements between the Company and Relay.
+Added: The Company recorded a reduction of rent expense under the Facilities Sharing Agreement of $ 0.6 million, $ 0.4 million, and $ 0.4 million for the years ended December 31, 2019, 2020 and 2021, respectively, which is included in general and administrative expenses in the consolidated statements of operations.
No amounts were due to the Company under the Facilities Sharing Agreement as of December 31, 2020 and December 31, 2021.
3 unchanged sentences
The agreement is cancellable at any time by either party.
−Removed: The Company provided telecommunication services to Republic of $ 3,884 , $ 2,602 , and $ 2,180 for the years ended December 31, 2018, 2019 and 2020 respectively.
+Added: The Company provided telecommunication services to Relay of $ 2.6 million, $ 2.2 million, and $ 1.8 million for the years ended December 31, 2019, 2020 and
+Added: Notes to Consolidated Financial Statements (continued)
+Added: 2021, respectively.
The Company recognized such amounts as revenue in the accompanying consolidated statements of operations.
−Removed: As of December 31, 2019 and December 31, 2020, the Company had a receivable of $ 161 and $ 170 , respectively, under the Master Services Agreement.
−Removed: On March 1, 2019, an amendment to the current Master Services Agreement was executed.
−Removed: Pursuant to the terms of the new agreement, Republic receives reduced pricing on its messaging services, effective April 1, 2019.
−Removed: All other terms and conditions of the existing agreement remain.
−Removed: On June 20, 2019, Republic executed a further amendment to the current Master Services Agreement.
−Removed: Pursuant to the terms of the June 20, 2019 amendment, Republic receives reduced pricing on its outbound voice services effective on June 20, 2019.
−Removed: Republic also executed a revenue commitment schedule on June 20, 2019.
−Removed: Pursuant to the revenue commitment schedule, Republic agreed to spend a minimum of $ 100 per month during the 11 -month period commencing July 1, 2019 through May 31, 2020.
−Removed: There are no minimum commitments beyond May 31, 2020.
−Removed: Subsequent to the expiration of the 180-day IPO blackout window on May 9, 2018, Republic employees that held Bandwidth stock options began exercising their options.
+Added: As of December 31, 2020 and December 31, 2021, the Company had a receivable of $ 0.2 million and $ 0.1 million, respectively, under the Master Services Agreement.
+Added: Subsequent to the expiration of the 180-day IPO blackout window on May 9, 2018, Relay employees that held Bandwidth stock options began exercising their options.
Upon exercise, Bandwidth withholds the employee tax amounts due from the proceeds.
−Removed: Bandwidth had collected on behalf of, and remitted withholding tax to, Republic of $ 9,213 , $ 1,781 , and $ 1,401 for the years ended December 31, 2018, 2019 and 2020 respectively.
−Removed: As of December 31, 2019 and December 31, 2020, the Company had no amounts were due to Republic.
−Removed: On September 30, 2019, the Company entered into a services agreement with Republic.
−Removed: Pursuant to the terms of the new agreement, Republic receives services performed by the Company’s legal department, effective September 30, 2019.
−Removed: The Company is compensated by Republic for these services based on costs incurred by the Company.
−Removed: The Company received net compensation under this agreement of $ 31 and $ 69 for the years ended December 31, 2019 and 2020, respectively, which is included in general and administrative expenses in the consolidated statements of operations.
−Removed: As of December 31, 2019 and December 31, 2020, the Company had a receivable of $ 10 and $ 2 under this agreement, respectively.
+Added: Bandwidth had collected on behalf of, and remitted withholding tax to, Relay of $ 1.8 million, $ 1.4 million, and $ 0.4 million for the years ended December 31, 2019, 2020 and 2021, respectively.
+Added: As of December 31, 2020 and December 31, 2021, the Company had no amounts that were due to Relay.
+Added: On September 30, 2019, the Company entered into a services agreement with Relay.
+Added: Pursuant to the terms of the new agreement, Relay receives services performed by the Company’s legal department, effective September 30, 2019.
+Added: The Company is compensated by Relay for these services based on costs incurred by the Company.
+Added: The Company received net compensation of less than $ 0.1 million for the years ended December 31, 2019 and 2021.
+Added: The Company received net compensation of $ 0.1 million for the year ended December 31, 2020, which is included in general and administrative expenses in the consolidated statements of operations.
+Added: As of December 31, 2020 and December 31, 2021, the Company had receivables of less than $ 0.1 million under this agreement.
Basic and Diluted Income (Loss) per Common Share
−Removed: Basic net income (loss) per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period.
+Added: Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period.
Diluted net income (loss) per share is computed by giving effect to all potential shares of common stock, including stock options and stock related to unvested restricted stock awards.
−Removed: Notes to Condensed Consolidated Financial Statements (continued)
−Removed: (In thousands, except share and per share amounts)
−Removed: The components of basic and diluted (loss) income per share are as follows:
+Added: Notes to Consolidated Financial Statements (continued)
+Added: The components of basic and diluted income (loss) per share are as follows:
Year ended December 31,
2019 2020 2021
+Added: (In thousands, except share and per share amounts)
Earnings per share
7 unchanged sentences
Diluted 23,923,777 24,092,574 25,090,916
−Removed: There were no common share equivalents with anti-dilutive effects for the years ended December 31, 2018 and 2019.
−Removed: The common share equivalents with anti-dilutive effects excluded from the weighted average shares used to calculate net loss per common share were 1,728,555 , which consists of 255,000 stock options, 450,614 nonvested RSUs outstanding and 1,022,941 from convertible debt conversion for the year ended December 31, 2020.
+Added: The following common share equivalents were excluded from the weighted average shares used to calculate net loss per common share because their effects would have been anti-dilutive:
+Added: As of December 31,
+Added: 2019 2020 2021
+Added: Stock options issued and outstanding — 255,000 180,209
+Added: Restricted stock units issued and outstanding — 450,614 344,486
+Added: Convertible senior notes (1)
+Added: — 1,022,941 987,149
+Added: Total — 1,728,555 1,511,844
+Added: ________________________
+Added: (1) As of December 31, 2020 and December 31, 2021, the Company used the treasury stock method to calculate the dilutive impact of the 2026 and 2028 Convertible Notes because at that time the Company expected to settle the principal amount of these notes in cash and any excess in shares of the Company ’ s Class A common stock.
+Added: As of December 31, 2020 and December 31, 2021, the conversion spread, calculated using the average market price of Class A common stock during the period consistent with the treasury stock method, had a dilutive impact for the 2026 Convertible Notes on diluted net income per share of Class A common stock when the average market price of the Company ’ s Class A common stock for a given period exceeded the conversion price of $ 91.03 per share.
+Added: As of December 31, 2021, the conversion spread for the 2028 Convertible Notes was anti-dilutive as the average market price of the Company ’ s Class A common stock for a given period did not exceed the conversion price of $ 179.27 per share.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.