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Revenue from Contracts with Customers | 9 Months Ended
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Jun. 30, 2019
Revenue from Contract with Customer [Abstract] |
Revenue from Contract with Customer | Revenue from Contracts with Customers Contracts with Customers Our revenue is primarily derived from term-based or perpetual licensing of software and scoring products and solutions, and associated maintenance; SaaS subscription services; scoring and credit monitoring services for consumers; and professional services. For contracts with customers that contain various combinations of products and services, we evaluate whether the products or services are distinct — distinct products or services will be accounted for as separate performance obligations, while non-distinct products or services are combined with others to form a single performance obligation. For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation on a relative standalone selling price (“SSP”) basis. Revenue is recognized when control of the promised goods or services is transferred to our customers. License revenue is derived from contracts in which we grant our direct customers or distributors the right to deploy or resell our software and scoring products and solutions on-premises. Our software offerings often include a perpetual or term-based license and post-contract support or maintenance, both of which generally represent distinct performance obligations and are accounted for separately. The transaction price is either in the form of a fixed consideration with separate stated prices for license and maintenance, or a sales or usage-based royalty — sometimes subject to a guaranteed minimum — for the license and maintenance bundle. When the amount is in the form of a fixed consideration, including the guaranteed minimum in sales or usage-based royalty, license revenue from distinct on-premises license is recognized at the point in time when the software or scoring solution is made available to the customer or distributor. Any royalties not subject to the guaranteed minimum or earned in excess of the minimum amount are recognized as transactional revenue when the subsequent sales or usage occurs. Revenue allocated to maintenance is generally recognized ratably over the contract period as customers simultaneously consume and receive benefits. In addition to sales or usage-based royalty on our software and scoring products, transactional revenue is also derived from SaaS contracts in which we provide customers with access to and standard support for our software application either in the FICO® Analytic Cloud or Amazon Web Services (“AWS”), our primary cloud infrastructure provider, on a subscription basis. The transaction price typically includes a fixed consideration in the form of a guaranteed minimum that allows up to a certain level of usage and a variable consideration in the form of usage or transaction-based fees in excess of the minimum threshold; or usage or transaction-based variable amount not subject to a minimum threshold. We determined the nature of our SaaS arrangements is to provide continuous access to our hosted application in the cloud, i.e., a stand-ready obligation that comprises a series of distinct service periods (e.g., a series of distinct daily, monthly or annual periods of service). We estimate the total variable consideration at contract inception — subject to any constraints that may apply — and update the estimates as new information becomes available and recognize the amount ratably over the SaaS service period, unless we determine it is appropriate to allocate the variable amount to each distinct service period and recognize revenue as each distinct service period is performed. We also derive transactional revenue from credit scoring and monitoring services that provide consumers access to their credit reports and enable them to monitor their credit. These are provided as either a one-time or ongoing subscription service renewed monthly or annually, all with a fixed consideration. We determined the nature of the subscription service is a stand-ready obligation to generate credit reports, provide credit monitoring and other services for our customers, which comprises a series of distinct service periods (e.g., a series of distinct daily, monthly or annual periods of service). Revenue from one-time or monthly subscription services is recognized during the period when service is performed. Revenue from annual subscription services is recognized ratably over the subscription period. Professional services include software or SaaS implementation, consulting, model development, training services and premium cloud support. They are sold either standalone, or together with other products or services and generally represent distinct performance obligations. The transaction price can be a fixed amount or on a time and materials basis. Revenue on fixed-price services is recognized using an input method based on labor hours expended which we believe provides a faithful depiction of the transfer of services. Revenue on services provided on a time and materials basis is recognized applying the “right-to-invoice” practical expedient as the amount to which we have a right to invoice the customer corresponds directly with the value of our performance to the customer. In addition, we sell premium cloud support on a subscription basis for a fixed amount, and revenue is recognized ratably over the contract term. Disaggregation of Revenue Information about disaggregated revenue by product deployment methods was as follows:
| Reportable Segments
| Quarter Ended June 30, 2019 |  | Quarter Ended June 30, 2018 (As Adjusted)
| Applications | Scores | Decision Management Software | Total |  | Applications | Scores | Decision Management Software | Total
| (In thousands)
On-Premises | $ | 102,673 |  | $ | — |  | $ | 27,138 |  | $ | 129,811 |  |  | $ | 83,904 |  | $ | — |  | $ | 22,196 |  | $ | 106,100 |
SaaS | 62,964 |  | — |  | 6,328 |  | 69,292 |  |  | 54,754 |  | — |  | 3,310 |  | 58,064 |
Scores | — |  | 115,146 |  | — |  | 115,146 |  |  | — |  | 90,829 |  | — |  | 90,829 |
Total | $ | 165,637 |  | $ | 115,146 |  | $ | 33,466 |  | $ | 314,249 |  |  | $ | 138,658 |  | $ | 90,829 |  | $ | 25,506 |  | $ | 254,993 |
| Reportable Segments
| Nine Months Ended June 30, 2019 |  | Nine Months Ended June 30, 2018 (As Adjusted)
| Applications | Scores | Decision Management Software | Total |  | Applications | Scores | Decision Management Software | Total
| (In thousands)
On-Premises | $ | 273,579 |  | $ | — |  | $ | 76,472 |  | $ | 350,051 |  |  | $ | 256,557 |  | $ | — |  | $ | 63,294 |  | $ | 319,851 |
SaaS | 181,532 |  | — |  | 17,924 |  | 199,456 |  |  | 168,771 |  | — |  | 8,629 |  | 177,400 |
Scores | — |  | 305,232 |  | — |  | 305,232 |  |  | — |  | 246,363 |  | — |  | 246,363 |
Total | $ | 455,111 |  | $ | 305,232 |  | $ | 94,396 |  | $ | 854,739 |  |  | $ | 425,328 |  | $ | 246,363 |  | $ | 71,923 |  | $ | 743,614 |
Information about disaggregated revenue by primary geographical markets was as follows:
| Reportable Segments
| Quarter Ended June 30, 2019 |  | Quarter Ended June 30, 2018 (As Adjusted)
| Applications | Scores | Decision Management Software | Total |  | Applications | Scores | Decision Management Software | Total
| (In thousands)
North America | $ | 88,210 |  | $ | 110,728 |  | $ | 14,930 |  | $ | 213,868 |  |  | $ | 80,598 |  | $ | 89,261 |  | $ | 13,055 |  | $ | 182,914 |
Latin America | 7,088 |  | 768 |  | 5,448 |  | 13,304 |  |  | 5,364 |  | 399 |  | 1,108 |  | 6,871 |
Europe, Middle East and Africa | 54,171 |  | 2,191 |  | 8,680 |  | 65,042 |  |  | 34,374 |  | 691 |  | 5,144 |  | 40,209 |
Asia Pacific | 16,168 |  | 1,459 |  | 4,408 |  | 22,035 |  |  | 18,322 |  | 478 |  | 6,199 |  | 24,999 |
Total | $ | 165,637 |  | $ | 115,146 |  | $ | 33,466 |  | $ | 314,249 |  |  | $ | 138,658 |  | $ | 90,829 |  | $ | 25,506 |  | $ | 254,993 |
| Reportable Segments
| Nine Months Ended June 30, 2019 |  | Nine Months Ended June 30, 2018 (As Adjusted)
| Applications | Scores | Decision Management Software | Total |  | Applications | Scores | Decision Management Software | Total
| (In thousands)
North America | $ | 256,385 |  | $ | 293,292 |  | $ | 45,354 |  | $ | 595,031 |  |  | $ | 250,700 |  | $ | 240,703 |  | $ | 38,898 |  | $ | 530,301 |
Latin America | 32,011 |  | 2,650 |  | 14,000 |  | 48,661 |  |  | 17,531 |  | 1,484 |  | 3,579 |  | 22,594 |
Europe, Middle East and Africa | 119,971 |  | 5,197 |  | 21,977 |  | 147,145 |  |  | 107,686 |  | 2,446 |  | 16,385 |  | 126,517 |
Asia Pacific | 46,744 |  | 4,093 |  | 13,065 |  | 63,902 |  |  | 49,411 |  | 1,730 |  | 13,061 |  | 64,202 |
Total | $ | 455,111 |  | $ | 305,232 |  | $ | 94,396 |  | $ | 854,739 |  |  | $ | 425,328 |  | $ | 246,363 |  | $ | 71,923 |  | $ | 743,614 |
Contract Balances We record a receivable when we satisfy a performance obligation prior to invoicing if only the passage of time is required before payment is due or if we have an unconditional right to consideration before we satisfy a performance obligation. We record a contract asset when we satisfy a performance obligation prior to invoicing but our right to consideration is conditional. We record deferred revenue when the payment is made or due before we satisfy a performance obligation. The following table provides information about receivables and deferred revenue from contracts with customers.
| June 30, 2019 |  | September 30, 2018
|  |  | (As Adjusted)
| (In thousands)
Receivables, which are included in “Accounts receivable, net” | $ | 321,483 |  |  | $ | 270,181 |
Deferred revenue* | $ | 107,871 |  |  | $ | 108,118 |
* Included in both deferred revenue and other liabilities on our condensed balance sheets at June 30, 2019 and September 30, 2018. Impairment loss recognized on receivables from contracts with customers during the quarters and nine months ended June 30, 2019 and 2018 was immaterial. Contract assets balance at June 30, 2019 and September 30, 2018 was immaterial. Deferred revenue primarily relates to our maintenance and SaaS contracts billed annually in advance and generally recognized ratably over the term of the service period. Significant changes in the deferred revenues balances during the nine months ended June 30, 2019 are as follows:
| Nine Months Ended June 30, 2019
| (In thousands)
Deferred revenues, beginning balance | $ | 108,118 |
Revenue recognized that was included in the deferred revenues balance at the beginning of the period | (87,600 | )
Increases due to billings, excluding amounts recognized as revenue during the period | 87,353 |
Deferred revenues, ending balance | $ | 107,871 |
Revenue recognized in the quarter and nine months ended June 30, 2019 from performance obligations satisfied in previous periods was immaterial. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to provide customers with financing or to receive financing from our customers. Examples include multi-year on-premises licenses that are invoiced annually with revenue recognized upfront, and invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period. Performance Obligations The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
| Remaining of Fiscal 2019 |  | Fiscal 2020 |  | Fiscal 2021 |  | Fiscal 2022 |  | Thereafter |  | Total
| (In thousands)
Applications | $ | 14,070 |  |  | $ | 51,346 |  |  | $ | 31,684 |  |  | $ | 12,167 |  |  | $ | 11,353 |  |  | $ | 120,620 |
Decision Management Software | 3,117 |  |  | 10,780 |  |  | 8,013 |  |  | 4,944 |  |  | 3,596 |  |  | 30,450 |
Total | $ | 17,187 |  |  | $ | 62,126 |  |  | $ | 39,697 |  |  | $ | 17,111 |  |  | $ | 14,949 |  |  | $ | 151,070 |
We apply the optional exemption that permits the omission of information about remaining performance obligations that have original expected durations of one year or less. We also applied the transition practical expedient that permits the omission of prior-period information about our performance obligations. Significant Judgments Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct and should be accounted for separately may require significant judgment. Specifically, when implementation service is included in the original software or SaaS offerings, judgment is required to determine if the implementation service significantly modifies or customizes the software or SaaS service in such a way that the risks of providing it and the customization service are inseparable. In rare instances, contracts may include significant modification or customization of the software of SaaS service and will result in the combination of software or SaaS service and implementation service as one performance obligation. We determine the SSPs using data from our historical standalone sales, or, in instances where such information is not available (such as when we do not sell the product or service separately), we consider factors such as the stated contract prices, our overall pricing practices and objectives, go-to-market strategy, size and type of the transactions, and effects of the geographic area on pricing, among others. When the selling price of a product or service is highly variable, we may use the residual approach to determine the SSP of that product or service. Significant judgment may be required to determine the SSP for each distinct performance obligation when it involves the consideration of many market conditions and entity-specific factors discussed above. Significant judgement may be required to determine the timing of satisfaction of a performance obligation in certain professional services contracts with a fixed consideration, in which we measure progress using an input method based on labor hours expended. In order to estimate the total hours of the project, we make assumptions about labor utilization, efficiency of processes, the customer’s specification and IT environment, among others. For certain complex projects, due to the risks and uncertainties inherent with the estimation process and factors relating to the assumptions, actual progress may differ due to the change in estimated total hours. Adjustments to estimates are made in the period in which the facts requiring such revisions become known and, accordingly, recognized revenues are subject to revisions as the contract progresses to completion. Capitalized Commission Costs We capitalize incremental commission fees paid as a result of obtaining customer contracts. Capitalized commission costs, which are recorded in other assets within the accompanying condensed consolidated balance sheets, were $31.7 million and $27.1 million at June 30, 2019 and September 30, 2018, respectively. Capitalized commission costs are amortized on a straight-line basis over ten years — determined using a portfolio approach — based on the transfer of goods or services to which the assets relate, taking into consideration both the initial and future contracts as we do not typically pay a commission on a contract renewal. The amortization costs are included in selling, general, and administrative expenses of our condensed consolidated statements of income and comprehensive income. The amount of amortization was $1.3 million and $1.1 million during the quarters ended June 30, 2019 and 2018, respectively, and $3.7 million and $3.3 million during the nine months ended June 30, 2019 and 2018, respectively. There was no impairment loss in relation to the costs capitalized. We apply a practical expedient to recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. These costs are recorded within selling, general, and administrative expenses.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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