Revenue Recognition

12 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

        Significant Accounting Policy

        We generate revenue from the sale of SaaS solutions that can include both fixed and usage-based fees, perpetual and term software licenses, professional services such as consulting and implementation services and software support and maintenance. We recognize revenue as we transfer goods and services to customers at amounts we expect to receive as consideration under enforceable contractual arrangements. Revenue is recognized as we satisfy contractual performance obligations which can occur either at a point in time or over time. For perpetual and term software licenses that do not involve significant customization and for equipment and supplies sales, we normally record revenue at a point in time. For professional services, support and maintenance, stand-ready performance obligations with respect to our SaaS solutions and software licenses that are dependent on significant customization by us we normally record revenue over time.

        We recognize revenue according to a five step model that involves:

•Identifying the contract (or contracts) with a customer;

•Identifying the performance obligations in the contract(s);

•Determining the transaction price;

•Allocating the transaction price to the contractual performance obligations, and

•Recognizing revenue as we satisfy the performance obligations.

        We consider a contract to exist when we have legally enforceable rights and obligations with a customer. Our contracts can take a variety of forms but are normally in writing and include all major commercial terms such as the goods or services we will be obligated to transfer under the arrangement, the amount the customer is obligated to pay us upon fulfillment of our obligations and the payment terms. Our contracts do not contain a financing component.

        Performance obligations in a contract are accounted for separately if they are determined to be distinct. We consider a performance obligation to be distinct if that good or service is separately identified from other items in the contract and if the customer can benefit from that performance obligation on its own or together with resources that are readily available to the customer. In assessing whether a customer can benefit from a performance obligation on its own, we consider factors such as the interdependency or interrelationship of the item with other goods or services in the contract, the complexity of any required integration or customization and the ability of the customer’s personnel or other third party providers to fulfill like goods or services. If a particular good or service is not considered to be distinct, it is combined with other performance obligations in the arrangement and revenue is recognized as the combined performance obligation is transferred to the customer.

        The transaction price is the amount of consideration we expect to be entitled to under a contract upon fulfillment of the performance obligations. The starting point for estimating the transaction price is the selling price stipulated in the contract, however we include in the determination of the overall transaction price an estimate of variable consideration to the extent it is probable that it will not result in a significant future reversal of revenue. Variable consideration can arise in our arrangements as a result of usage-based fees. For contracts with a long period over which usage-based fees can occur, or in contracts with customers with whom we do not have a reasonable operating history, we often constrain the amount of variable consideration included in the transaction price. We update our estimate of variable consideration at the end of each financial reporting period. We exclude from the determination of the transaction price sales and other taxes we bill to and collect from customers and remit to government authorities. Shipping and handling activities performed after the customer has obtained control of the good or service is accounted for as a fulfillment activity.

        The transaction price is allocated to contractual performance obligations on a relative standalone selling price basis. We normally estimate standalone selling price using the adjusted market approach, maximizing the use of observable inputs and other factors that can include: the price we charge when we sell an item separately, our internal price lists and internal pricing guidelines, cost of delivering the item and overall gross margin expectations and information about the customer or class of customer. Revenue is recorded, either at a point in time or over time, as we satisfy the performance obligations in a contract.

        Nature of Goods and Services

        Subscriptions: We generate subscriptions revenue through the provision of SaaS solutions which can include contractually fixed revenue amounts as well as usage-based fees. Our SaaS arrangements consist of an obligation for us to provide continuous access to a technology solution that we host, which we account for as a stand-ready performance obligation. These contracts may also include variable pricing or overage fees based on customer processing, usage or volume. We recognize revenue for fixed subscription

fees ratably over the non-cancelable term of the contract, commencing on the date the customer has access to the solution. In circumstances where we meet certain requirements to allocate variable consideration to a distinct service within a series of related services, we allocate variable consideration to each distinct period of service within the series. If we do not meet those requirements, we include an estimate of variable consideration in the transaction price and recognize it ratably over the non-cancelable term of the contract.

        For certain of our SaaS solutions, customers are charged a fee for implementation services. In determining whether the implementation services are distinct from the hosting services we consider various factors, including the level of customization, complexity of the integration, the interdependency and interrelationship between the implementation services and the hosting services and the ability (or inability) of the customer's personnel or other service providers to perform the services. We have concluded that the implementation services in our hosting arrangements with multiple performance obligations are not distinct and therefore we recognize fees for implementation services ratably over the non-cancelable term of the hosting contract.

        We license software on a subscription basis under contractual arrangements where customers pay a specified fee, inclusive of support and maintenance, for a time-based license right to use our software. These fees recur periodically unless the customer opts to cancel their subscription arrangement with us. These contracts typically contain two distinct performance obligations: the software license and support and maintenance. The portion of the transaction price allocated to the license right is recognized at the point in time in which we have provided the customer access to the intellectual property and the license term has commenced. The portion of the transaction price allocated to support and maintenance is recognized ratably over the non-cancelable contract term.

        Software Licenses: Software licenses revenue reflects fees we charge to license software on a perpetual basis. For software licenses that do not include significant customization we recognize revenue at the point in time where the customer has obtained access to the intellectual property and the license period has commenced.

        Periodically our software arrangements require significant customization and modification and involve extended implementation periods. In these arrangements the professional services and software license are highly interdependent and we treat the software license and professional services as a combined performance obligation. We recognize revenue for the combined performance obligation over time and measure progress to completion based on labor hours incurred as a percentage of total expected labor hours. We believe the use of labor hours as an input measure provides a faithful depiction of the transfer of goods and services under these contracts.

        Support and Maintenance: Our software licenses are generally sold with post-contract support which is comprised of technical support and unspecified software upgrades. Unspecified upgrades refer to software upgrades which we make available at our discretion and from time-to-time, on a “when and as available” basis. We account for post-contract support as a stand-ready performance obligation and recognize revenue ratably over the non-cancelable contract term which is typically one year.

        Professional Services: Our professional services revenue is normally comprised of implementation, consulting and training services. Except for professional service performance obligations that form part of an overall, highly customized arrangement, our professional services typically represent distinct performance obligations and revenue is recognized as the services are performed.

        Other: Other revenue is derived from the sale of equipment and supplies and is recognized at the point in time control transfers to the customer.

Remaining Performance Obligations

        The transaction price allocated to remaining performance obligations that are unsatisfied, or partially unsatisfied, as of June 30, 2020 and June 30, 2019 represents contracted revenue that will be recognized in future periods. Our future performance obligations consist primarily of SaaS-based subscription obligations relating to future periods, contracted but uncompleted professional services obligations and support and maintenance obligations. The amount of revenue recognized from performance obligations satisfied in prior periods was not significant during each of the twelve months ended June 30, 2020 and June 30, 2019.

        Revenue allocated to remaining performance obligations was $409 million as of June 30, 2020 of which we expect to recognize approximately $158 million over the next twelve months and the remainder thereafter. We exclude from our measure of remaining performance obligations amounts related to contracts with a term of twelve months or less, royalty based transactions and future transactional or usage-based fees for which the value of services transferred to the customer will correspond to the amount we will invoice for those services.

Contract Assets and Liabilities

        The table below presents our accounts receivable, contract assets and deferred revenue balances as of June 30, 2020 and June 30, 2019.

	June 30,		June 30,
	2020		2019		$ Change
	(in thousands)
Accounts receivable	$	69,970	$	77,285	$	(7,315)
Contract assets	3,646		5,135		(1,489)
Deferred revenue	96,033		92,159		3,874

        Accounts receivable include amounts related to our contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced. Contract assets arise when we recognize revenue in excess of the amount billed to the customer and the right to payment is contingent on conditions other than simply the passage of time, such as the completion of a related performance obligation. Contract assets are classified in our consolidated balance sheets as other current assets for those contract assets with amortization periods of one year or less and other assets for contract assets with amortization periods greater than one year. Deferred revenue consists of billings to or payments from customers in excess of amounts recognized as revenue.

The decrease in accounts receivable at June 30, 2020 as compared to June 30, 2019 reflects the impact of cash collections in the fourth quarter of fiscal year 2020, particularly in the U.S.

For the fiscal years ended June 30, 2020 and June 30, 2019 we recognized $79.7 million and $72.2 million, respectively, in revenue from amounts that were included in deferred revenue as of June 30, 2019 and July 1, 2018, respectively.

        Contract Costs

        We capitalize incremental costs incurred in connection with obtaining a contract if they have a period of benefit that is greater than one year and we expect to recover the costs through future contract revenues. Incremental costs incurred to obtain a contract relate to sales commissions. We also capitalize costs incurred in fulfilling a contract when the costs relate directly to a specifically identifiable customer contract, when the costs generate or enhance resources that we will use to satisfy performance obligations in the future and when the costs are expected to be recovered through future contract revenues. At June 30, 2020 capitalized costs to obtain a contract and capitalized fulfillment costs totaled $7.6 million and $18.5 million, respectively. At June 30, 2019, capitalized costs to obtain a contract and capitalized fulfillment costs totaled $6.4 million and $16.4 million, respectively.

        Capitalized costs are amortized on a basis consistent with the transfer of the goods or services to which the asset relates. This results in capitalized costs being recognized on a ratable basis over the estimated period of future benefit, which is generally five years. We estimate the future period of benefit considering the current contract term, the impact of estimated customer renewal terms and the estimated life of the technology solution underlying the contracts. Amortization expense associated with costs of obtaining and costs of fulfilling a contract was $2.0 million and $3.3 million, respectively, for the fiscal year ended June 30, 2020, and $1.6 million and $3.5 million, respectively, for the fiscal year ended June 30, 2019. Amortization expense associated with costs of obtaining and costs of fulfilling a contract were recorded as components of sales and marketing expense and cost of revenues, respectively, in our consolidated statement of comprehensive (loss) income.