Revenue from Contracts with Customers

9 Months Ended

Jun. 30, 2021

Revenue From Contract With Customer [Abstract]

Revenue from Contracts with Customers

2. Revenue from Contracts with Customers

Contract Assets and Contract Liabilities

(in thousands)	June 30, 2021		September 30, 2020
Contract asset	$	10,739	$	11,984
Deferred revenue	$	473,613	$	426,465

As of June 30, 2021, $5.9 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. Approximately $6.6 million of the September 30, 2020 contract asset balance was transferred to receivables during the nine months ended June 30, 2021 as a result of the right to payment becoming unconditional. Additions to contract assets of approximately $5.3 million related to revenue recognized in the period, net of billings. The majority of the contract asset balance relates to two large professional services contracts with invoicing terms based on performance milestones. There were no impairments of contract assets during the nine months ended June 30, 2021.

During the nine months ended June 30, 2021, we recognized $368.8 million of revenue that was included in deferred revenue as of September 30, 2020 and there were additional deferrals of $400.4 million, primarily related to new billings. In addition, deferred revenue increased by $15.5 million (net of a $10.4 million fair value adjustment) as a result of the acquisition of Arena. For subscription contracts, we generally invoice customers annually. The balance of total short- and long-term receivables as of June 30, 2021 was $601.5 million, compared to $511.3 million as of September 30, 2020.

Our multi-year, non-cancellable on-premise subscription contracts provide customers with an annual right to exchange software within the subscription with other software. As of June 30, 2021 and September 30, 2020, the total refund liability was $41.5 million and $34.5 million, respectively, primarily associated with the annual right to exchange on-premise subscription software.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Effective October 1, 2020, we adopted ASC 326, Financial Instruments—Credit Losses, which replaces the incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. In determining the adequacy of the allowance for doubtful accounts, management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations, customer credit-worthiness, current economic conditions, and accounts receivable aging trends. Our allowance for doubtful accounts on trade accounts receivable was $0.4 million and $0.5 million as of June 30, 2021 and September 30, 2020. Uncollectible trade accounts receivable written-off and bad debt expense were immaterial in the three and nine months ended June 30, 2021.

Costs to Obtain a Contract

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 relate to commissions. As of June 30, 2021 and September 30, 2020, deferred costs to obtain a contract of $41.7 million and $33.9 million, respectively, are included in other current assets and $73.9 million and $72.9 million, respectively, are included in other assets (non-current). Amortization expense related to costs to obtain a contract with a customer was $11.7 million and $33.1 million in the three and nine months ended June 30, 2021, respectively, and $9.0 million and $25.2 million in the three and nine months ended June 27, 2020, respectively. There were no impairments of the contract cost assets in the three and nine months ended June 30, 2021 and June 27, 2020.

Remaining Performance Obligations

Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. As of June 30, 2021, the amounts include performance obligations of $473.6 million recorded in deferred revenue and $850.0 million that are not yet recorded in the Consolidated Balance Sheets. We expect to recognize approximately 85% of the total $1,323.6 million over the next 24 months, with the remaining amount thereafter. Certain of our multi-year subscription contracts with start dates on or after October 1, 2018 contain a limited annual cancellation right. For such cancellable subscription contracts, we consider each annual period a discrete contract. Early in the fourth quarter of 2019, we discontinued offering this cancellation right for substantially all new contracts. Remaining performance obligations do not include the cancellable value for subscriptions which contain this cancellation right.

Disaggregation of Revenue

(in thousands)	Three months ended				Nine months ended
	June 30, 2021		June 27, 2020		June 30, 2021		June 27, 2020
Recurring revenue(1)	$	387,175	$	310,621	$	1,186,978	$	931,852
Perpetual license		7,259		6,773		22,644		23,988
Professional services		41,234		34,327		116,882		111,594
Total revenue	$	435,668	$	351,721	$	1,326,504	$	1,067,434

(1) Recurring revenue is comprised of subscription, perpetual support, SaaS, and cloud revenue.

For further disaggregation of revenue by geographic region and product group see Note 11. Segment and Geographic Information.