Revenue from Contracts with Customers

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Adoption of ASC 606, Revenue from Contracts with Customers

We adopted ASC 606 on January 1, 2018 using the modified retrospective approach for all contracts not completed as of the date of adoption. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of our software licenses, maintenance and services.

We recorded an increase to retained earnings of $242.4 million, or $183.1 million net of tax, on January 1, 2018 due to the cumulative effect of the ASC 606 adoption, with the impact primarily derived from revenue related to time-based software lease licenses. Software lease license revenue was recognized ratably over the term of the contract under the previous guidance; however, approximately 50% of the contract is recognized up front at the commencement of the lease under ASC 606 with the remainder recognized ratably to maintenance and service revenue.

Disaggregation of Revenue

The following table summarizes revenue:



	Year Ended December 31,
(in thousands)	2019 (ASC 606)			2018 (ASC 606)			2017 (ASC 605)
Revenue:
Lease licenses	$	406,043		$	275,619		$	376,886
Perpetual licenses	293,587			301,098			248,078
Software licenses	699,630			576,717			624,964
Maintenance	760,574			676,883			440,428
Service	55,688			40,036			29,858
Maintenance and service	816,262			716,919			470,286
Total revenue	$	1,515,892		$	1,293,636		$	1,095,250

Direct revenue, as a percentage of total revenue	77.1		%	77.6		%	75.2		%
Indirect revenue, as a percentage of total revenue	22.9		%	22.4		%	24.8		%

Our software licenses revenue is recognized up front, while maintenance and service revenue is generally recognized over the term of the contract.

Deferred Revenue

Deferred revenue consists of billings made or payments received in advance of revenue recognition from customer agreements. The timing of revenue recognition may differ from the timing of billings to customers. Payment terms vary by the type and location of customer and the products or services offered. The time between invoicing and when payment is due is not significant.

The changes in deferred revenue, inclusive of both current and long-term deferred revenue, during the years ended December 31, 2019 and 2018 were as follows:



(in thousands)	2019			2018
Beginning balance – January 1	$	343,174		$	299,730
Acquired deferred revenue	6,880			2,470
Deferral of revenue	1,532,549			1,339,964
Recognition of deferred revenue	(1,515,892		)	(1,293,636		)
Currency translation	(1,437		)	(5,354		)
Ending balance – December 31	$	365,274		$	343,174

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes both deferred revenue and backlog. Our backlog represents installment billings for periods beyond the current

quarterly billing cycle. Revenue recognized during the years ended December 31, 2019 and 2018 included amounts in deferred revenue and backlog at the beginning of the period of $475.9 million and $387.2 million, respectively.

Total revenue allocated to remaining performance obligations as of December 31, 2019 will be recognized as revenue as follows:



(in thousands)
Next 12 months	$	569,751
Months 13-24	177,364
Months 25-36	93,097
Thereafter	30,531
Total revenue allocated to remaining performance obligations	$	870,743