3. Revenue

The Company generates substantially all its revenues from roadside assistance services (“RAS”) initiated through its software platform primarily in the United States and Canada. The Company’s platform enables its customers (“Customer Partners”) to outsource delivery for all or portions of their roadside assistance programs. The Company manages the RAS process after receiving the initial distress call or web-based request through final disposition. The Company also offers RAS directly to motorists via pay-per-use or direct membership offerings. In addition, revenue is earned from platform license fees, whether delivered via cloud or traditional license delivery, professional services, and memberships.

The Company’s policies for recognizing revenues have not changed from those described in the Annual Report. In summary:

The Company recognizes revenue when there is evidence of a contract, probable collection of the consideration to which the Company expects to be entitled to receive, and completion of the performance obligations. The Company recognizes revenue on a gross basis (as the principal) or net basis (as the agent) depending on the nature of the Company’s role with respect to the Customer Partner to deliver RAS.

The Company has applied the right to invoice practical expedient to all its RAS, membership, and software licensing arrangements and, therefore, recognizes revenue over time for the amount it invoices its Customer Partner.

The Company recognizes revenues derived from professional services on a straight-line basis over the term of the agreements. Efforts to deliver on the performance obligations are expensed evenly throughout the performance period.

For further details regarding revenue recognition, see Note 4 “Revenue” to the audited consolidated financial statements in the Annual Report.

Cost of revenue, exclusive of depreciation and amortization, consists primarily of fees paid to Service Providers. Other costs included in cost of revenue are specifically the technology hosting and platform-related costs, certain personnel costs related to direct call center support to Consumers as part of platform authentication, and amortization of costs to fulfill.

Contract Assets

The Company capitalizes costs to obtain contracts with Customer Partners, primarily employee sales commissions. Sales commissions relating to revenues recognized over a period longer than one year are considered incremental and recoverable costs of obtaining a contract and are deferred as other non-current assets and are amortized on a straight-line basis over the initial contract term. Commission expenses are included in sales and marketing expense in the condensed consolidated statements of operations and comprehensive loss.

Capitalized contract costs associated with the costs to fulfill certain contracts are deferred as other non-current assets and are amortized, on a straight-line basis, over the expected period of benefit for contracts with an amortization period that exceeds one year. Amortization cost is included in cost of revenue in the condensed consolidated statements of operations and comprehensive loss. The expected period of benefit is determined using the initial contract term.