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Note 3 - Revenue Recognition and Sales Commissions
 9 Months Ended
Sep. 30, 2022
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

3. REVENUE RECOGNITION AND SALES COMMISSIONS

 

Revenue Recognition

 

Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled in exchange for transferring those goods or services.

 

Revenue is recognized based on the following five step model:

 

 

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Identification of the contract with a customer

 

 

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Identification of the performance obligations in the contract

 

 

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Determination of the transaction price

 

 

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Allocation of the transaction price to the performance obligations in the contract

 

 

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Recognition of revenue when, or as, the Company satisfies a performance obligation

 

The following table represents revenues disaggregated by revenue source (in thousands). Sales taxes are excluded from revenues.

 

  

Three Months Ended September 30, 2022

  

Nine Months Ended September 30, 2022

 

Business Segments

 

Workforce Solutions

  

Provider Solutions

  

Consolidated

  

Workforce Solutions

  

Provider Solutions

  

Consolidated

 

Subscription services

 $52,347  $11,720  $64,067  $153,871  $34,742  $188,613 

Professional services

  1,716   1,502   3,218   4,705   4,972   9,677 

Total revenues, net

 $54,063  $13,222  $67,285  $158,576  $39,714  $198,290 
 
  

Three Months Ended September 30, 2021

  

Nine Months Ended September 30, 2021

 

Business Segments

 

Workforce Solutions

  

Provider Solutions

  

Consolidated

  

Workforce Solutions

  

Provider Solutions

  

Consolidated

 

Subscription services

 $49,729  $10,973  $60,702  $150,239  $32,475  $182,714 

Professional services

  1,426   1,963   3,389   4,320   5,340   9,660 

Total revenues, net

 $51,155  $12,936  $64,091  $154,559  $37,815  $192,374 

 

For the three months ended September 30, 2022 and 2021, the Company recognized a reduction of $44,000 and a charge of $96,000 in impairment losses on receivables and contract assets arising from the Company's contracts with customers, respectively. For the nine months ended September 30, 2022 and 2021, the Company recognized $0.4 million and $0.1 million in impairment losses on receivables and contract assets arising from the Company’s contracts with customers, respectively.

 

Deferred revenue represents contract liabilities that are recorded when cash payments are received or are due in advance of our satisfaction of performance obligations. During the three months ended  September 30, 2022 and 2021, we recognized revenues of approximately $39.9 million and $39.4 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods. During the nine months ended September 30, 2022 and 2021, we recognized $67.9 million and $59.3 million of revenue from amounts included in deferred revenues at the beginning of the respective periods. As of September 30, 2022, approximately $473 million of revenue is expected to be recognized from remaining performance obligations under contracts with customers. We expect to recognize revenue related to approximately 44% of these remaining performance obligations over the next 12 months, with the remaining amounts recognized thereafter.

 

Sales Commissions

 

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Under ASC 606, costs to acquire contracts with customers, such as the initial sales commission payment and associated payroll taxes, are capitalized in the period a customer contract is entered into and are amortized consistent with the transfer of the goods or services to the customer over the expected period of benefit. Capitalized contract costs are included in deferred commissions in the accompanying Condensed Consolidated Balance Sheets. The expected period of benefit is the contract term, except when the capitalized commission is expected to provide economic benefit to the Company for a period longer than the contract term, such as for new customer or incremental sales where renewals are expected and renewal commissions are not commensurate with initial commissions. Non-commensurate commissions are amortized over the greater of the contract term or technological obsolescence period of approximately three years. The Company recorded amortization of deferred commissions of approximately $2.8 million and $2.4 million for the three months ended September 30, 2022 and 2021, and $7.8 million and $6.9 million for the nine months ended September 30, 2022 and 2021, respectively, which is included in sales and marketing expenses in the accompanying Condensed Consolidated Statements of Income.