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Revenue | 6 Months Ended
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Jun. 30, 2018
Revenue from Contract with Customer [Abstract] |
Revenue | 2. Revenue Revenue Recognition In accordance with ASC 606 revenue is recognized upon transfer of control of promised products and/or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. Contract Combination. The Company may execute more than one contract or agreement with a single customer. The separate contracts or agreements may be viewed as one combined arrangement or separate agreements for revenue recognition purposes. In order to reach appropriate conclusions regarding whether such agreements should be combined, the Company evaluates whether the agreements were negotiated as a package with a single commercial objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance of another agreement, or whether the product(s) or services promised in the agreements represent a single performance obligation. The conclusions reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related to those arrangements. Software as a Service (“SaaS”) and Platform as a Service (“PaaS”) Arrangements. The Company’s SaaS-based and PaaS-based arrangements, including implementation, support and other services, represent a single promise to provide continuous access (i.e. a stand-ready performance obligation) to its software solutions and their processing capabilities in the form of a service through one of the Company’s data centers. As each day of providing access to the software solution(s) is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, the Company’s single promise under its SaaS-based and PaaS-based arrangements is comprised of a series of distinct service periods. The Company’s SaaS-based and PaaS-based arrangements may include fixed consideration, variable consideration, or a combination of the two. Fixed consideration is recognized over the term of the arrangement or longer if the fixed consideration relates to a material right. Variable consideration in these arrangements is typically a function of transaction volume or another usage-based measure. Depending upon the structure of a particular arrangement, the Company: (1) allocates the variable amount to each distinct service period within the series and recognizes revenue as each distinct service period is performed (i.e. direct allocation), (2) estimates total variable consideration at contract inception (giving consideration to any constraints that may apply and updating the estimates as new information becomes available) and recognizes the total transaction price over the period to which it relates, or (3) applies the ‘right to invoice’ practical expedient and recognizes revenue based on the amount invoiced to the customer during the period. License Arrangements. The Company’s software license arrangements provide the customer with the right to use functional intellectual property (as it exists at the point in time at which the license is granted) for the duration of the contract term. Implementation, support, and other services are typically considered distinct performance obligations when sold with a software license unless these services are determined to significantly modify the software. Payment terms for the Company’s software license arrangements generally include fixed license and capacity fees that are payable up front or over time. These arrangements may also include incremental usage-based fees that are payable when the customer exceeds its contracted license capacity limits. The Company accounts for capacity overages as a usage-based royalty that is recognized when the usage occurs. When a software license arrangement contains payment terms that are extended beyond one year, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the software license fees and is recognized as interest income over the extended payment period. The total fixed software license fee net of the significant financing component is recognized as revenue at the point in time when the software is transferred to the customer. For those software license arrangements that include customer-specific acceptance provisions, such provisions are generally presumed to be substantive and the Company does not recognize revenue until the earlier of the receipt of a written customer acceptance, objective demonstration that the delivered product meets the customer-specific acceptance criteria, or the expiration of the acceptance period. The Company recognizes revenues on such arrangements upon the earlier of receipt of written acceptance or the first production use of the software by the customer. For software license arrangements in which the Company acts as a distributor of another company’s product, and in certain circumstances, modifies or enhances the product, revenues are recorded on a gross basis. These include arrangements in which the Company takes control of the products and is responsible for providing the product or service. For software license arrangements in which the Company acts as a sales agent for another company’s product, revenues are recorded on a net basis. These include arrangements in which the Company does not take control of products and is not responsible for providing the product or service. For software license arrangements in which the Company utilizes a third-party distributor or sales agent, the Company recognizes revenue upon transfer of control of the software license(s) to the third-party distributor or sales agent. The Company’s software license arrangements typically provide the customer with a standard 90-day assurance-type warranty. These warranties do not represent an additional performance obligation as services beyond assuring that the software license complies with agreed-upon specifications are not provided. Software license arrangements typically include an initial post contract customer support (maintenance or “PCS”) term of one year with subsequent renewals for additional years within the initial license period. The Company’s promise to those customers who elect to purchase PCS represents a stand-ready performance obligation that is distinct from the license performance obligation and recognized over the PCS term. The Company also provides various professional services to customers with software licenses. These include project management, software implementation, and software modification services. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract(s) and are recognized as the related services are performed. Consideration payable under these arrangements is either fixed fee or on a time-and-materials basis, which represents variable consideration that must be estimated using the most likely amount based on the range of hours expected to be incurred in providing the services. The Company estimates the standalone selling price (“SSP”) for maintenance and professional services based on observable standalone sales. The Company applies the residual approach to estimate the SSP for software licenses. Refer to Note 10, Segment Information, for further details, including disaggregation of revenue based on primary solution category and geographic location. Significant Judgments The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information. The Company also applies judgment in determining the term of an arrangement when early termination rights are provided to the customer. The Company’s software license arrangements with its customers often include multiple promises to transfer licensed software products and services. Determining whether the products and/or services are distinct performance obligations that should be accounted for separately may require significant judgment. The Company’s SaaS and PaaS arrangements may include variable consideration in the form of usage-based fees. If the arrangement that includes variable consideration in the form of usage-based fees does not meet the allocation exception for variable consideration, the Company estimates the amount of variable consideration at the outset of the arrangement using either the expected value or most likely amount method, depending on the specifics of each arrangement. These estimates are constrained to the extent that it is probable that a significant reversal of incremental revenue will not occur and are updated each reporting period as additional information becomes available. Judgment is used in determining: (1) whether the financing component in a software license agreement is significant and, if so, (2) the discount rate used in calculating the significant financing component. The Company assesses the significance of the financing component based on the ratio of license fees paid over time to total license fees. If determined to be significant, the financing component is calculated using a rate that discounts the license fees to the cash selling price. Judgment is also used in assessing whether the extension of payment terms in a software license arrangement results in variable consideration and, if so, the amount to be included in the transaction price. The Company applies the portfolio approach to estimating the amount of variable consideration in these arrangements using the most likely amount method that is based on the Company’s historical collection experience under similar arrangements. Significant judgment is required to determine the SSP for each performance obligation, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service. As the selling prices of the Company’s software licenses are highly variable, the Company estimates SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist for the other services. The Company uses a range of amounts to estimate SSP for maintenance and services. These ranges are based on standalone sales and vary based on the type of service and geographic region. If the SSP of a performance obligation is not directly observable, the Company will maximize observable inputs to determine its SSP. Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records an accrued receivable when revenue is recognized prior to invoicing and the Company’s right to consideration only requires the passage of time, or deferred revenue when revenue is recognized subsequent to invoicing. Total receivables represent amounts billed and amounts earned that are to be billed in the future (i.e., accrued receivables). Included in accrued receivables are services and SaaS and PaaS revenues earned in the current period but billed in the following period and amounts due under multi-year software license arrangements with extended payment terms for which the Company has an unconditional right to invoice and receive payment in the future.
(in thousands) |  | June 30, 2018 |  |  | December 31, 2017 |
Billed Receivables |  | $ | 168,921 |  |  | $ | 240,137 |
Allowance for doubtful accounts |  |  | (3,459 | ) |  |  | (4,799 | )
Billed Receivables, net |  | $ | 165,462 |  |  | $ | 235,338 |
Accrued receivables |  |  | 319,476 |  |  |  | 27,507 |
Significant financing component |  |  | (31,549 | ) |  |  | — |
Total accrued receivables, net |  |  | 287,927 |  |  |  | 27,507 |
Less current accrued receivables |  |  | 117,323 |  |  |  | 27,507 |
Less current significant financing component |  |  | (9,593 | ) |  |  | — |
Total long-term accrued receivables, net |  | $ | 180,197 |  |  | $ | — |
Total receivables, net |  | $ | 453,389 |  |  | $ | 262,845 |
No customer accounted for more than 10% of the Company’s consolidated receivables balance as of June 30, 2018 or December 31, 2017. Deferred revenue includes amounts due or received from customers for software licenses, maintenance, services, and/or SaaS and PaaS services in advance of recording the related revenue. Changes in deferred revenue were as follows:
(in thousands) |  | Deferred Revenue |
Balance, January 1, 2018 |  | $ | 145,344 |
Deferral of revenue |  |  | 102,160 |
Recognition of deferred revenue |  |  | (91,390 | )
Foreign currency translation |  |  | (2,877 | )
Balance, June 30, 2018 |  | $ | 153,237 |
Revenue allocated to remaining performance obligations represents contracted revenue that will be recognized in future periods, which is comprised of deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. This does not include:
| (1) | Revenue that will be recognized in future periods from capacity overages that are accounted for as a usage-based royalty.
| (2) | SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the ‘right to invoice’ practical expedient.
| (3) | SaaS and PaaS revenue from variable consideration that will be recognized in accordance with the direct allocation method.
Revenue allocated to remaining performance obligations was $586.1 million as of June 30, 2018, of which the Company expects to recognize approximately 47% over the next 12 months and the remainder thereafter. During the three and six month periods ended June 30, 2018, the revenue recognized by the Company from performance obligations satisfied in previous periods was not material. Costs to Obtain and Fulfill a Contract The Company accounts for costs to obtain and fulfill its contracts in accordance with ASC 340, Other Assets and Deferred Costs. The Company capitalizes certain of its sales commissions that meet the definition of incremental costs of obtaining a contract and for which the amortization period is greater than one year. The costs associated with those sales commissions is capitalized during the period in which the Company becomes obligated to pay the commissions and is amortized over the period in which the related products or services are transferred to the customer. As of June 30, 2018, $0.3 million and $17.5 million of these costs are included in other current and other non-current assets, respectively, on the condensed consolidated balance sheets. During the three and six months ended June 30, 2018, the Company recognized $2.0 million and $4.3 million, respectively, of sales commission expense related to the amortization of these costs, which is included in selling and marketing expense. The Company capitalizes costs incurred to fulfill its contracts that: (1) relate directly to the arrangement, (2) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the arrangement, and (3) are expected to be recovered through revenue generated under the arrangement. Contract fulfillment costs are expensed as the Company transfers the related services to the customer. As of June 30, 2018, $0.1 million and $12.0 million of these costs are included in other current and other non-current assets, respectively, on the condensed consolidated balance sheets. The amounts capitalized primarily relate to direct costs that enhance resources under the Company’s SaaS and PaaS arrangements. During the three and six months ended June 30, 2018, the Company recognized $1.2 million and $2.4 million, respectively, of expense related to the amortization of these costs, which is included in cost of revenue. Financial Statement Effect of Applying ASC 606 As the modified retrospective transition method does not result in recast of the prior year financial statements, ASC 606 requires the Company to provide additional disclosures for the amount by which each financial statement line item is affected by adoption of the standard and explanation of the reasons for significant changes. The financial statement line items affected by adoption of ASC 606 are as follows:
|  | June 30, 2018 |
(in thousands) |  | As Reported |  |  | Without application of ASC 606 |  |  | Effect of Change Higher / (Lower) |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Receivables, net of allowances |  | $ | 273,192 |  |  | $ | 199,145 |  |  | $ | 74,047 |
Recoverable income taxes |  |  | 7,903 |  |  |  | 6,375 |  |  |  | 1,528 |
Prepaid expenses |  |  | 28,370 |  |  |  | 29,111 |  |  |  | (741 | )
Other current assets |  |  | 21,488 |  |  |  | 21,303 |  |  |  | 185 |
Accrued receivables, net |  |  | 180,197 |  |  |  | — |  |  |  | 180,197 |
Deferred income taxes, net |  |  | 25,181 |  |  |  | 66,926 |  |  |  | (41,745 | )
Other noncurrent assets |  |  | 57,631 |  |  |  | 41,324 |  |  |  | 16,307 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Deferred revenue |  |  | 102,333 |  |  |  | 120,253 |  |  |  | (17,920 | )
Income taxes payable |  |  | 3,137 |  |  |  | 2,081 |  |  |  | 1,056 |
Other current liabilities |  |  | 58,615 |  |  |  | 58,850 |  |  |  | (235 | )
Deferred income taxes, net |  |  | 25,171 |  |  |  | 6,448 |  |  |  | 18,723 |
Stockholders’ equity |  |  |  |  |  |  |  |  |  |  |  |
Total stockholders’ equity |  |  | 940,715 |  |  |  | 712,576 |  |  |  | 228,139 |
|  | For the Three Months Ended June 30, 2018 |
(in thousands) |  | As Reported |  |  | Without application of ASC 606 |  |  | Effect of Change Higher / (Lower) |
Revenues |  |  |  |  |  |  |  |  |  |  |  |
Software as a service and platform as a service |  | $ | 113,600 |  |  | $ | 112,959 |  |  | $ | 641 |
License |  |  | 45,555 |  |  |  | 50,815 |  |  |  | (5,260 | )
Maintenance |  |  | 55,048 |  |  |  | 56,243 |  |  |  | (1,195 | )
Services |  |  | 20,792 |  |  |  | 20,725 |  |  |  | 67 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
Selling and marketing |  |  | 33,160 |  |  |  | 31,923 |  |  |  | 1,237 |
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 2,742 |  |  |  | 192 |  |  |  | 2,550 |
Other, net |  |  | (1,677 | ) |  |  | (557 | ) |  |  | (1,120 | )
Income tax provision |  |  |  |  |  |  |  |  |  |  |  |
Income tax expense (benefit) |  |  | 3,764 |  |  |  | 4,609 |  |  |  | (845 | )
|  | For the Six Months Ended June 30, 2018 |
(in thousands) |  | As Reported |  |  | Without application of ASC 606 |  |  | Effect of Change Higher / (Lower) |
Revenues |  |  |  |  |  |  |  |  |  |  |  |
Software as a service and platform as a service |  | $ | 217,880 |  |  | $ | 218,133 |  |  | $ | (253 | )
License |  |  | 73,601 |  |  |  | 94,736 |  |  |  | (21,135 | )
Maintenance |  |  | 111,707 |  |  |  | 112,014 |  |  |  | (307 | )
Services |  |  | 41,117 |  |  |  | 40,754 |  |  |  | 363 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
Selling and marketing |  |  | 65,053 |  |  |  | 62,269 |  |  |  | 2,784 |
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 5,486 |  |  |  | 371 |  |  |  | 5,115 |
Other, net |  |  | (1,732 | ) |  |  | (1,341 | ) |  |  | (391 | )
Income tax provision |  |  |  |  |  |  |  |  |  |  |  |
Income tax expense (benefit) |  |  | (188 | ) |  |  | 2,566 |  |  |  | (2,754 | )
The following summarizes the significant changes resulting from the adoption of ASC 606 compared to if the Company had continued to recognize revenues under ASC 985-605, Revenue Recognition: Software (ASC 605). Receivables, Deferred Revenue, License Revenue, and Interest Income The change in receivables, deferred revenue, license revenue, and interest income is due to a change in the timing and the amount of recognition for software license revenues under ASC 606. Under ASC 605, the Company recognized revenue upon delivery provided (i) there is persuasive evidence of an arrangement, (ii) collection of the fee is considered probable, and (iii) the fee is fixed or determinable. For software license arrangements in which a significant portion of the fee is due more than 12 months after delivery or when payment terms are significantly beyond the Company’s standard business practice, the license fee is deemed not fixed or determinable. For software license arrangements in which the fee is not considered fixed or determinable, the license is recognized as revenue as payments become due and payable, provided all other conditions for revenue recognition have been met. License revenue under ASC 605 includes revenue from software license arrangements with extended payment terms for which the due and payable pattern of recognition was applied and revenue from renewals of software license arrangements in the period during which the renewal is signed. Under ASC 606, license revenue from these software license arrangements with extended payment terms is accelerated (i.e. upfront recognition) and adjusted for the effects of the financing component, if significant. The significant financing component in these software license arrangements is recognized as interest income over the extended payment period. As many of these software license arrangements were active as of the date the Company adopted ASC 606, the license fees are included in the Company’s cumulative adjustment to retained earnings. Revenue for license renewals is recognized when the customer can begin to use and benefit from the license, which is generally at the commencement of the license renewal period. Other Current Assets, Other Noncurrent Assets, and Selling and Marketing Under ASC 606, certain of the Company’s sales commissions meet the definition of incremental costs of obtaining a contract. Accordingly, these costs are capitalized and the expense is recognized as the related goods or services are transferred to the customer. Prior to the adoption of ASC 606, the Company recognized sales commission expenses as they were incurred. Deferred Income Taxes, Net The change in deferred income taxes is primarily due to the deferred tax effects resulting from the adjustment to retained earnings for the cumulative effect of applying ASC 606 to active contracts as of the adoption date. The adoption of ASC 606 had no impact in total on the Company’s cash flows from operations.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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