Revenue from Contracts with Customers

12 Months Ended

Sep. 30, 2020

Revenue From Contract With Customer [Abstract]

Revenue from Contracts with Customers

3. Revenue from Contracts with Customers

We adopted ASC 606, Revenue from Contracts with Customers, effective October 1, 2018, using the modified retrospective method. Upon adoption of ASC 606, we recorded a decrease in accumulated deficit of $432.2 million ($363.2 million, net of tax) due to the cumulative effect of the ASC 606 adoption, with an impact from revenue adjustments of $366.8 million primarily derived from acceleration of revenue related to on-premises subscription software licenses. The revenue-related adjustment was reflected on the adjusted opening balance sheet as an increase to unbilled receivables of $218.5 million, a decrease to deferred revenue of $143.2 million and an increase to other assets of $5.1 million.

Contract Assets and Contract Liabilities

(in thousands)	September 30,
	2020		2019
Contract asset	$	11,984	$	21,038
Deferred revenue	$	426,465	$	396,632

As of September 30, 2020, $6.9 million of our contract assets are expected to be transferred to receivables within the next 12 months and therefore are included in other current assets. The remainder is included in other long-term assets and expected to be transferred within the next 24 months. As of September 30, 2019, the entire contract asset balance was included in other current assets.

Approximately $15.1 million of the September 30, 2019 contract asset balance was transferred to receivables during the year ended September 30, 2020 as a result of the right to payment becoming unconditional. The majority of the contract asset balance relates to two large professional services contracts with invoicing terms based on performance milestones. The net decrease in contract assets of $9.0 million includes an increase of approximately $6.1 million related to revenue recognized in the period, net of billings.

During the year ended September 30, 2020, we recognized $379.8 million of revenue that was included in deferred revenue as of September 30, 2019 and there were additional deferrals of $409.7

million, primarily related to new billings. The additional deferrals include an immaterial amount from the acquisition of Onshape. For subscription contracts, we generally invoice customers annually. The balance of total short- and long-term receivables as of September 30, 2020 was $511.3 million, compared to $412.5 million as of September 30, 2019.

Costs to Obtain or Fulfill a Contract

ASC 606 requires the capitalization of certain incremental costs of obtaining a contract, which impacts the period in which we record our commission expense. Prior to our adoption of ASC 606, we recognized commissions expense as incurred. Under ASC 606, we are required to recognize these expenses over the period of benefit associated with these costs. This results in a deferral of certain commission expenses each period. Upon adoption of ASC 606 on October 1, 2018, we recognized a $70.0 million asset for deferred commission related to contracts that were not completed prior to October 1, 2018. As the revenue recognition pattern has changed under ASC 606, the recognition of costs to fulfill contracts has also changed to match this pattern of recognition. As of October 1, 2018, this resulted in a $2.8 million increase in our accumulated deficit with recognition of an offsetting current liability.

We recognize an asset for the incremental costs of obtaining a contract with a customer if the benefit of those costs is expected to be longer than one year. These deferred costs (primarily commissions) are amortized proportionately related to revenue over five years, which is generally longer than the term of the initial contract because of anticipated renewals as commissions for renewals are not commensurate with commissions related to our initial contracts. As of September 30, 2020 and September 30, 2019, deferred costs of $33.9 million and $27.7 million, respectively, were included in other current assets and $72.9 million and $64.8 million, respectively, were included in other assets (non-current). Amortization expense related to costs to obtain a contract with a customer was $36.2 million and $30.4 million in the years ended September 30, 2020 and 2019, respectively. There were no impairments of the contract cost asset in the years ended September 30, 2020 and 2019.

Remaining Performance Obligations

Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. As of September 30, 2020, the amounts include additional performance obligations of $426.5 million recorded in deferred revenue and $794.4 million that are not yet recorded in the consolidated balance sheets. We expect to recognize approximately 85% of the total $1,220.9 million over the next 24 months, with the remaining amount thereafter. Some of our multi-year subscription contracts with start dates on or after October 1, 2018 contain a limited annual cancellation right. For such contracts, we consider each annual period a discrete contract. Early in the fourth quarter of 2019, we discontinued offering the cancellation right for substantially all new contracts. Remaining performance obligations do not include the cancellable value for subscriptions which contain this clause.

Disaggregation of Revenue

(in thousands)	Year ended September 30,
	As Reported ASC 606		As Reported ASC 606		ASC 605		As Reported ASC 605
	2020		2019		2019		2018
Total recurring revenue	$	1,281,949	$	1,017,398	$	1,078,627	$	978,853
Perpetual license		32,668		70,702		72,191		109,634
Professional services		143,798		167,531		160,676		153,337
Total revenue	$	1,458,415	$	1,255,631	$	1,311,494	$	1,241,824

For further disaggregation of revenue by geographic region and product group see Note 18. Segment and Geographic Information.