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Summary of significant accounting policies
 9 Months Ended
Sep. 30, 2022
Accounting Policies [Abstract]  
Summary of significant accounting policies Summary of significant accounting policies
The Company’s significant accounting policies are discussed in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes to these policies during the three and nine months ended September 30, 2022. The following describes the impact of certain policies.
Trade accounts receivable, net
The allowance for credit losses is based on an expected loss model that estimates losses over the expected life of the trade accounts receivable. The Company estimates expected credit losses based on the Company’s historical loss information, current and future economic and market conditions, and ongoing review of customers’ account balances.
Activity related to our allowance for credit losses for trade accounts receivable was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
Balance, beginning of period$479 $480 $391 $530 
Provision48 37 310 93 
Write-offs(99)(66)(281)(238)
Recoveries of amounts previously written off34 9 42 75 
Balance, end of period$462 $460 $462 $460 
Revenue recognition
The Company applies ASC 606 and follows a five-step model to determine the appropriate amount of revenue to be recognized in accordance with ASC 606.
Disaggregation of Revenue
The Company separates revenue into subscription and non-subscription categories to disaggregate those revenues that are term-based and renewable from those that are one-time in nature. Revenue from subscription and non-subscription contractual arrangements were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
SaaS subscription and support and maintenance$112,351 $83,775 $312,992 $222,672 
On‑premise subscription6,173 6,925 17,140 23,228 
Subscription revenue118,524 90,700 330,132 245,900 
Professional services5,216 4,083 14,187 12,015 
Perpetual licenses817 838 4,134 4,671 
Non‑subscription revenue6,033 4,921 18,321 16,686 
Total revenue$124,557 $95,621 $348,453 $262,586 
Contract Balances
If revenue is recognized in advance of the right to invoice, a contract asset is recorded in other current assets on the condensed consolidated balance sheets. The opening and closing balances of contract assets were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
Balance, beginning of the period$1,840 $1,596 $1,792 $947 
Balance, end of the period1,775 1,726 1,775 1,726 
Change$(65)$130 $(17)$779 
For the three and nine months ended September 30, 2022 and 2021, the allowance for expected credit losses associated with contract assets was not material.
Contract liabilities consist of customer billings in advance of revenue being recognized. The Company invoices its customers for subscription, support and maintenance, and services in advance.
Changes in contract liabilities, including revenue earned during the period from the beginning contract liability balance and new deferrals of revenue during the period, were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
Balance, beginning of the period$316,952 $238,457 $282,128 $205,509 
Acquisitions— 5,200 — 5,200 
Revenue earned(96,542)(71,574)(199,357)(144,038)
Deferral of revenue120,820 98,284 258,459 203,696 
Balance, end of the period$341,230 $270,367 $341,230 $270,367 
There were no significant changes to our contract assets and liabilities during the three and nine months ended September 30, 2022 and 2021 outside of our sales activities.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and noncancellable amounts to be invoiced. As of September 30, 2022, the Company had $407.3 million of remaining performance obligations, with 73% expected to be recognized as revenue over the succeeding 12 months, and the remainder generally expected to be recognized over the three years thereafter.
Deferred Contract Costs
Sales commissions, as well as associated payroll taxes and retirement plan contributions (together, contract costs), that are incremental to the acquisition of customer contracts are capitalized using a portfolio approach as deferred contract costs in the condensed consolidated balance sheets when the period of benefit is determined to be greater than one year.
Total amortization of contract costs was $4.2 million and $3.1 million for the three months ended September 30, 2022 and 2021, respectively, and $12.1 million and $9.0 million for the nine months ended September 30, 2022 and 2021, respectively.
The Company periodically reviews these deferred contract costs to determine whether events or changes in circumstances have occurred that could affect the period of benefit of these deferred contract costs. There were no impairment losses recorded during the three and nine months ended September 30, 2022 and 2021.
Strategic investments
In the third quarter of 2022, the Company made a $1.0 million investment via a SAFE in ZecOps. The SAFE contains customary terms for an instrument of its type, including repayment or conversion upon certain future liquidity events. The investment, which does not have a readily determinable fair value, is measured using the measurement alternative in accordance with ASC 321 and included in other assets on the condensed consolidated balance sheet. As of September 30, 2022, the balance of the investment was $1.0 million. In the third quarter of 2022, the Company also executed a $2.0 million convertible promissory note with SwiftConnect. The note contains customary terms for an instrument of its type, including repayment or conversion upon certain future liquidity events. The note matures on July 29, 2024, and the Company intends to hold the note until maturity, unless it is otherwise repaid or converted pursuant to its terms. The investment is recorded at cost and included in other assets on the condensed consolidated balance sheet. As of September 30, 2022, the balance of the investment was $2.0 million. The Company evaluates its strategic investments quarterly for impairment. During the period ended September 30, 2022, there were no changes in the carrying value of the Company’s strategic investments. All gains and losses on the Company’s strategic investments, whether realized or unrealized, are recognized in the condensed consolidated statements of operations.
Adoption of new accounting pronouncements
Business Combinations — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in accordance with acquisition accounting. The new guidance should be applied prospectively to acquisitions occurring on or after the effective date. The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not been issued. The Company early adopted the new standard on January 1, 2022. The adoption of the standard did not have any impact on the
Company’s condensed consolidated financial statements. We are applying the new guidance to acquisitions completed in 2022 and thereafter.