TOPIC 606 ADOPTION IMPACT AND REVENUE FROM CONTRACTS WITH CUSTOMERS: (Notes)

9 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Topic 606 Adoption Impact and Revenue from Contracts with Customers

TOPIC 606 ADOPTION IMPACT AND REVENUE FROM CONTRACTS WITH CUSTOMERS:

On April 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of April 1, 2018. Results for reporting periods beginning after April 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic reporting under Topic 605.

Under Topic 606, revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The Company determines revenue recognition through the following steps:

•Identification of the contract, or contracts, with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

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

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

We recorded a net increase to our opening retained earnings of $12.7 million, net of tax, due to the cumulative impact of adopting Topic 606, with the impact primarily related to the capitalization of costs of obtaining customer contracts.

The details of the significant changes and quantitative impact of the changes are disclosed below.

Costs of Obtaining Customer Contracts

The Company previously recognized commission payments made for obtaining a contract as an operating expense when incurred. Under Topic 606, the Company capitalizes incremental costs to acquire contracts and amortizes them over the expected period of benefit, which we have determined to be four years. As of December 31, 2018, the remaining unamortized contract costs were $9.5 million and are included in deferred commissions, net, in the condensed consolidated balance sheet. Net capitalized costs of $3.0 million were recorded as a reduction to operating expense for the nine months ended December 31, 2018. No impairment was recognized for the nine months ended December 31, 2018.

Impacts on Financial Statements

Condensed Consolidated Balance Sheet	Impact of changes in accounting policies
	As reported December 31, 2018		Adjustments		Balances without adoption of Topic 606
Deferred income taxes	149		2,256		2,405
Deferred commissions, net	9,478		(9,478)		—
Others	1,917,891		—		1,917,891
Total assets	$	1,927,518	$	(7,222)	$	1,920,296
Total liabilities	567,902		—		567,902
Retained earnings	1,715,066		(7,222)		1,707,844
Other equity	(355,450)		—		(355,450)
Total equity	1,359,616		(7,222)		1,352,394
Total liabilities and equity	$	1,927,518	$	(7,222)	$	1,920,296

Condensed Consolidated Statement of Operations	Impact of changes in accounting policies
	As reported for the nine months ended December 31, 2018		Adjustments		Balances without adoption of Topic 606
Revenues	$	207,304	$	—	$	207,304
Cost of revenue	82,958		—		82,958
Gross profit	$	124,346	$	—	$	124,346
Operating expenses:
Sales and marketing	$	109,317	$	3,035	$	112,352
Other operating expenses	131,041		—		131,041
Total operating expenses	240,358		3,035		243,393
Loss from operations	(116,012)		(3,035)		(119,047)
Total other income	10,479		—		10,479
Loss from continuing operations before income taxes	(105,533)		(3,035)		(108,568)
Income taxes (benefit)	(21,274)		(722)		(21,996)
Net loss from continuing operations	$	(84,259)	$	(2,313)	$	(86,572)

Condensed Consolidated Statement of Comprehensive Income	Impact of changes in accounting policies
	As reported for the nine months ended December 31, 2018		Adjustments		Balances without adoption of Topic 606
Net earnings	$	1,074,008	$	(2,313)	$	1,071,695
Other comprehensive loss:
Change in foreign currency translation adjustment	(2,876)		—		(2,876)
Comprehensive income	$	1,071,132	$	(2,313)	$	1,068,819

Condensed Consolidated Statement of Cash Flows	Impact of changes in accounting policies
	As reported for the nine months ended December 31, 2018		Adjustments		Balances without adoption of Topic 606
Net earnings	$	1,074,008	$	(2,313)	$	1,071,695
Earnings from discontinued operations	(1,158,267)		—		(1,158,267)
Adjustments for:
Deferred income taxes	20,723		(722)		20,001
Others	91,425		—		91,425
Changes in:
Accounts receivable, net	(35,011)		—		(35,011)
Deferred commissions	(3,035)		3,035		—
Other assets	654		—		654
Accounts payable and other liabilities	(29,274)		—		(29,274)
Deferred revenue	(1,555)		—		(1,555)
Net cash from operating activities	(40,332)		—		(40,332)
Net cash from investing activities	(7,795)		—		(7,795)
Net cash from financing activities	(820,644)		—		(820,644)
Net cash from discontinued operations	2,277,338		—		2,277,338
Effect of exchange rate changes on cash	(1,811)		—		(1,811)
Net change in cash and cash equivalents	1,406,756		—		1,406,756
Cash and cash equivalents at beginning of period	140,018		—		140,018
Cash and cash equivalents at end of period	$	1,546,774	$	—	$	1,546,774

Disaggregation of Revenue

In the following table, revenue is disaggregated by primary geographical market and major service offerings (dollars in thousands).

	For the nine months ended
	December 31,
Primary Geographical Markets	2018		2017
United States	$	189,997	$	143,937
Europe	13,858		12,916
APAC	3,449		3,038
	$	207,304	$	159,891
Major Offerings/Services
Subscription	171,184		125,157
Marketplace and Other	36,120		34,734
	$	207,304	$	159,891

Transaction Price Allocated to the Remaining Performance Obligations

We have performance obligations associated with fixed commitments in customer contracts for future services that have not yet been recognized in our condensed consolidated financial statements. The amount of fixed revenue not yet recognized was $335.1 million as of December 31, 2018. The Company expects to recognize revenue on substantially all of these remaining performance obligations by March 31, 2021 with the balance recognized thereafter.