Revenue and Capitalized Contract Costs

12 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

Revenue and Capitalized Contract Costs

Revenue and Capitalized Contract Costs

Customers are typically invoiced for Smart Home Services in advance or at the time the Company delivers the related Smart Home Services. The majority of customers pay at the time of invoice via credit card, debit card or ACH. Deferred revenue relates to the advance consideration received from customers, which precedes the Company’s satisfaction of the associated performance obligation. The Company’s deferred revenues primarily result from customer payments received in advance for recurring monthly monitoring and other Smart Home Services, or other one-time fees, because these performance obligations are satisfied over time.

The Company also provides its customers with service warranties associated with product replacement and related services. As of December 31, 2022 and 2021, the Company had warranty service reserves of $6.8 million and $6.0 million, respectively, which are included in accrued expenses and other current liabilities on the consolidated balance sheets.

During the years ended December 31, 2022 and 2021, the Company recognized revenues of $437.4 million and $320.0 million, respectively, that were included in the deferred revenue balance as of December 31, 2021 and 2020, respectively.

The revenue related to the Company's smart energy business is primarily from commissions received by operating as a sales dealer for third-party residential solar installers. The Company invoices the solar installer, and recognize the associated revenue at the time the solar installation is complete. During the years ended December 31, 2022 and 2021, the Company recognized revenues of $94.4 million and $49.9 million, respectively, related to the Company's smart energy business. The Company did not recognize a material amount of solar revenues for the year ended December 31, 2020.

Transaction Price Allocated to the Remaining Performance Obligations

As of December 31, 2022, approximately $3.7 billion of revenue is expected to be recognized from remaining performance obligations for subscription contracts. The Company expects to recognize approximately 64% of the revenue related to these remaining performance obligations over the next 24 months, with the remaining balance recognized over an additional 36 months.

Timing of Revenue Recognition

The Company considers Products, related installation, and its proprietary back-end cloud platform software and services an integrated system that allows the Company’s customers to monitor, control and protect their homes. These Smart Home Services are accounted for as a single performance obligation that is recognized over the customer’s contract term, which is generally three to five years.

Capitalized Contract Costs

Capitalized contract costs generally include commissions, other compensation and related costs paid directly for the generation and installation of new or modified customer contracts, as well as the cost of Products installed in the customer home at the commencement or modification of the contract. The Company defers and amortizes these costs for new or modified subscriber contracts on a straight-line basis over the expected period of benefit of five years.