Revenue Recognition

12 Months Ended

Dec. 31, 2020

Revenue From Contract With Customer [Abstract]

Revenue Recognition

(15) Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers ("Topic 606"). Topic 606 superseded the revenue recognition requirements in ASC Topic 605, Revenue Recognition ("Topic 605"), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, the Company refers to Topic 606 and Subtopic 340-40 as the "new revenue standard" or “ASC 606.”

The Company adopted the requirements of the new revenue standard as of January 1, 2018, utilizing the modified retrospective method of transition. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. Adoption of the new revenue standard resulted in changes to the Company’s accounting policies for revenue recognition and deferred commissions as detailed below. The Company applied the new revenue standard using a practical expedient where

the consideration allocated to the remaining performance obligations or an explanation of when the Company expects to recognize that amount as revenue for all reporting periods presented before the date of the initial application is not disclosed.

Based on the results of the Company’s evaluation, the adoption of the new revenue standard did not have a material impact on its revenue for the year ended December 31, 2018. The primary impact of adopting the new revenue standard relates to the deferral of incremental commission costs of obtaining subscription contracts. Under Topic 605, the Company deferred only direct and incremental commission costs to obtain a contract and amortized those costs over one year. Under the new revenue standard, the Company defers all incremental commission costs to obtain the contract. The Company amortizes costs for subscription-related commissions over a period of benefit that the Company has determined to be four years. Sales commissions attributable to professional services are expensed within twelve months of selling the service to the customer. Adoption of the new revenue standard had no impact on total cash provided from or used in operating, financing, or investing activities in the Company’s consolidated statements of cash flows.

The cumulative effect of the changes made to the Company’s consolidated January 1, 2018 balance sheet for the adoption of the new revenue standard was as follows (in thousands):

	Balance at December 31, 2017			Adjustments Due to ASC 606		Balance at January 1, 2018
BALANCE SHEET
Assets
Accounts receivable, net	$	31,699		$	100	$	31,799
Deferred costs		2,429			2,132		4,561
Deferred costs (non-current)		—			6,965		6,965
Liabilities and Stockholders’ Equity
Other current liabilities		808			100		908
Deferred revenue (current and non-current)		73,072			—		73,072
Accumulated deficit		(109,252	)		9,097		(100,155	)

The following table disaggregates the Company’s revenue by geography which provides information as to the major source of revenue (in thousands):

	Year Ended December 31,
Primary Geographic Markets	2020		2019		2018
United States	$	201,458	$	157,039	$	119,589
International		69,683		43,843		27,505
Total	$	271,141	$	200,882	$	147,094

The following table presents the Company’s revenues disaggregated by revenue source (in thousands):

	Year Ended December 31,
	2020		2019		2018
Subscription services	$	242,651	$	179,934	$	137,260
Professional services		20,410		17,187		9,538
Software licenses and other		8,080		3,761		296
Total	$	271,141	$	200,882	$	147,094

Contract Assets

The Company does not have material amounts of contract assets since revenue is recognized as control of goods is transferred or as services are performed. There are a small number of professional services that may occur over a

period of time, but that period of time is generally very short in duration. Any contract assets that may arise are recorded in other assets in the Company’s consolidated balance sheet net of an allowance for credit losses.

Contract Liabilities

The Company’s contract liabilities consist of advance payments and deferred revenue. The Company’s contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. The Company classifies advance payments and deferred revenue as current or noncurrent based on the timing of when it expects to recognize revenue. Generally, all contract liabilities are expected to be recognized within one year and are included in deferred revenue in the Company’s consolidated balance sheet. The noncurrent portion of deferred revenue is included and separately disclosed in the Company’s consolidated balance sheet.

Deferred Costs

Current deferred costs, which primarily consist of deferred sales commissions, were $14.5 million and $9.9 million as of December 31, 2020 and 2019, respectively. Noncurrent deferred costs, which primarily consist of deferred sales commissions, were $15.9 million and $14.2 million as of December 31, 2020 and 2019, respectively. During the years ended December 31, 2020, 2019 and 2018, amortization expense for the deferred costs was $12.6 million, $8.0 million and $5.5 million, respectively. There was  no impairment loss in relation to the costs capitalized.

Deferred Revenue

For the years ended December 31, 2020, 2019 and 2018, $123.3 million, $86.2 million and $62.5 million, respectively, of subscription services, license and other revenue was recognized and was included in the deferred revenue balances at the beginning of the respective period. For the years ended December 31, 2020 and 2019, $6.6 million and $6.0 million, respectively, of professional services revenue was recognized and was included in the deferred revenue balance at the beginning of the period.

As of December 31, 2020, approximately $358.4 million of revenue is expected to be recognized from remaining performance obligations for subscription and other contracts.  The Company expects to recognize revenue on approximately $212.8 million of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.     

As of December 31, 2020, approximately $16.5 million of revenue is expected to be recognized from remaining performance obligations for professional services contracts. The Company expects to recognize revenue on approximately $13.5 million of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.