Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Accounting Standards Codification (“ASC”) Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 replaced most existing revenue recognition guidance in U.S. GAAP. In 2015, the FASB deferred the effective date of ASU No. 2014-09 by one year. In 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations, ASU No. 2016-10, Identifying Performance Obligations and Licensing, ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, all of which further amended ASU No. 2014-09. The Company adopted the standard on January 1, 2018 using the modified retrospective method which requires a cumulative-effect adjustment to the opening balance of retained earnings within stockholders’ equity. The Company has determined that the most significant impact upon adoption was to third-party software and hardware revenue, which was primarily recorded on a gross basis as the principal in the transaction through December 31, 2017 and presented on a net basis as the agent as of January 1, 2018. The adoption of the standard also resulted in minor changes to the timing of revenue recognition. As the agent, revenue from multi-year sales of third-party software and support is recognized upfront as the performance obligation is fulfilled, rather than annually as invoiced to the customer. Additionally, variable consideration related to service contracts, such as volume discounts and holdbacks, are recognized earlier under the new standard in certain instances. The impact from these timing changes was immaterial as of January 1, 2018, and therefore, did not result in a cumulative-effect adjustment to the opening balance of retained earnings. The adoption of the standard also resulted in increases to accounts receivable, net and deferred revenue within other current liabilities for those contracts under which the Company’s right to consideration is unconditional. Refer to Impacts of ASC Topic 606 Adoption on Current Period Results below for the impact of adopting ASC Topic 606 on the Unaudited Condensed Consolidated Balance Sheet as of September 30, 2018 and the Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2018. There was no material impact on the Unaudited Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2018. The adoption of ASU No. 2014-09 and its amendments also resulted in additional disclosures around the nature and timing of performance obligations, contract costs, and deferred revenue, as well as significant judgments and practical expedients used by the Company. See Note 4, Revenue, for these disclosures.

Impacts of ASC Topic 606 Adoption on Current Period Results

The impacts of ASC Topic 606 adoption on the Unaudited Condensed Consolidated Balance Sheet as of September 30, 2018 are as follows (in thousands):



	As Reported		ASC Topic 606 Impact			Without ASC Topic 606 Adoption
Accounts receivable, net	$	109,764	$	(1,512	)	$	108,252
Total assets	549,269		(1,512		)	547,757
Other current liabilities	44,172		(1,512		)	42,660
Total liabilities	194,265		(1,512		)	192,753

The impacts of ASC Topic 606 adoption on the Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2018 are as follows (in thousands):



	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
	As Reported (Net Presentation)		ASC Topic 606 Impact		Without ASC Topic 606 Adoption (Gross Presentation)		As Reported (Net Presentation)		ASC Topic 606 Impact		Without ASC Topic 606 Adoption (Gross Presentation)
Revenues
Services	$	122,879	$	—	$	122,879	$	363,986	$	—	$	363,986
Software and hardware	1,054		3,665		4,719		2,686		16,050		18,736
Total revenues	123,933		3,665		127,598		366,672		16,050		382,722
Cost of revenues
Cost of services	79,183		—		79,183		238,004		—		238,004
Software and hardware costs	—		3,665		3,665		—		16,050		16,050
Total cost of revenues	79,183		3,665		82,848		238,004		16,050		254,054
Income from operations	9,261		—		9,261		24,543		—		24,543
Net income	6,305		—		6,305		17,083		—		17,083

In February 2016, the FASB issued ASU No. 2016-02, Leases, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC Topic 842, Leases. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and ASU 2018-11, Leases – Targeted Improvement, which further amended ASU No. 2016-02. These updates require lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The updates also expand the required quantitative and qualitative disclosures surrounding leases. These updates are effective for the Company on January 1, 2019. The amendments to ASU 2016-02 allow companies to elect to apply the provisions of the new standard at the effective date without adjusting the comparative periods presented, which the Company currently expects to elect. The Company continues to evaluate the effect that ASU No. 2016-02 and its amendments will have on its consolidated financial statements and disclosures. The Company expects the primary impact upon adoption will be the recognition, on a discounted basis, of its minimum commitments under noncancellable operating leases on its consolidated balance sheets resulting in the recording of right of use assets and lease obligations. The Company is also evaluating provisions within its contracts to identify any embedded leases which would have a potential impact upon adoption. Current minimum commitments under noncancellable operating leases are disclosed in Note 14, Commitments and Contingencies.