Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

The Company's subscription contracts are typically satisfied ratably over the subscription term as its cloud-based offerings are delivered to customers electronically and over time. In addition, the Company recognizes revenues for certain limited scan arrangements on an as-used basis. The Company recognizes revenue related to professional services based on time and materials or completion of milestones stated in the contracts.

As the vast majority of the Company’s offerings are subscription based, the Company rarely needs to allocate the transaction price to separate performance obligations. In the rare case that allocation of the transaction price is needed, the Company recognizes revenue in proportion to the standalone selling prices ("SSP") of the underlying services at contract inception. If an SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs. The Company's transaction prices typically do not include variable consideration and are a fixed amount for a specific period of time, and the majority of contracts are twelve months with certain customers signing longer term deals. In general, the Company does not offer rights of return, performance bonuses, customer loyalty programs, payments via non-cash methods, refunds, volume rebates, incentive payments, penalties, price concessions or payments or discounts contingent on future events and the Company does not grant its customers any material rights. For contracts that include leased scanners and PCPs, we apply the lease and non-lease component practical expedient under ASC 842 to account for non-lease components and lease components as combined components under the revenue recognition guidance in ASU 2014-09, "Revenue from Contracts with Customers" (Topic 606) as the subscriptions are the predominant components in the arrangements.

Costs of shipping and handling charges associated with physical scanner appliances and other computer equipment are included in cost of revenues. Sales taxes and other taxes collected from customers to be remitted to government authorities are excluded from revenues.

Incremental direct costs of obtaining a contract, which consist of sales commissions primarily for new business and upsells, are deferred and amortized over the estimated life of the customer relationship if renewals are expected and the renewal commission is not commensurate with the initial commission. The Company elected the practical expedient to expense commissions on renewals where the specific anticipated contract term amortization period is one year or less. The Company amortizes the capitalized commission cost as a selling expense on a straight-line basis over a period of five years. The Company classifies deferred commissions as current or noncurrent based on the timing of when it expects to recognize the expense. The current and noncurrent portions of deferred commissions are included in prepaid expenses and other current assets and other noncurrent assets, respectively, in its condensed consolidated balance sheets.

Commission asset balances are as follows (in thousands):



	September 30, 2019		December 31, 2018
Commission asset, current	$	1,975	$	1,480
Commission asset, noncurrent	$	6,090	$	4,692

For the three months ended September 30, 2019 and 2018, the Company recognized $0.5 million and $0.3 million, respectively, of commission expense from amortization of its commission assets. For the nine months ended September 30, 2019 and 2018, the Company recognized $1.4 million and $0.8 million, respectively, of commission expense from amortization of its commission assets. During the same periods, there was no impairment loss related to capitalized costs.

The Company records deferred revenue when cash payments are received or due in advance of its performance offset by revenue recognized in the period. Revenue of $31.3 million and $28.4 million was recognized during the three months ended September 30, 2019 and 2018, respectively, which amounts were included in the deferred revenue balances as of December 31, 2018 and 2017, respectively. Revenue of $144.6 million and $126.6 million was recognized during the nine months ended September 30, 2019 and 2018, respectively, which amounts were included in the deferred revenue balances as of December 31, 2018 and 2017, respectively.

The Company's payment terms vary by the type and location of its customer and the products or services offered. For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer.

The following table sets forth the expected revenue from all remaining performance obligations as of September 30, 2019 (in thousands):



	Total Expected Revenue
2019 (remaining three months)	$	20,017
2020	55,826
2021	27,277
2022	7,180
2023	1,439
2024 and thereafter	402
Total	$	112,141