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Revenue from Contracts with Customers
3 Months Ended
Mar. 31, 2019
Revenue From Contract With Customer [Abstract]  
Revenue from Contracts with Customers

2. Revenue from Contracts with Customers

Our two primary revenue streams are (i) software delivery, support and maintenance and (ii) client services. Software delivery, support and maintenance revenue consists of all of our proprietary software sales (either under a perpetual or term license delivery model), subscription-based software sales, transaction-related revenue, the resale of hardware and third-party software and revenue from post-contract client support and maintenance services, which include telephone support services, maintaining and upgrading software and ongoing enhanced maintenance. Client services revenue consists of revenue from managed services solutions, such as private cloud hosting, outsourcing and revenue cycle management, as well as other client services and project-based revenue from implementation, training and consulting services. For some clients, we host the software applications licensed from us using our own or third-party servers. For other clients, we offer an outsourced service in which we assume partial to total responsibility for a healthcare organization’s IT operations using our employees.

At March 31, 2019 and 2018, we had capitalized costs to obtain or fulfill a contract of $22.7 million and $27.4 million, respectively, in Prepaid and other current assets and $32.0 million and $37.3 million, respectively, in Other assets. During the three months ended March 31, 2019 and 2018, we recognized $7.6 million and $8.1 million, respectively, of amortization expense related to such capitalized costs, which is included in selling, general and administrative expenses within the consolidated statements of operations.

The timing of revenue recognition, billings and cash collections results in billed and unbilled accounts receivables, contract assets and customer advances and deposits. Accounts receivable, net includes both billed and unbilled amounts where the right to receive payment is unconditional and only subject to the passage of time. Contract assets include amounts where revenue recognized exceeds the amount billed to the customer and the right to payment is not solely subject to the passage of time. Deferred revenue includes advanced payments and billings in excess of revenue recognized. Our contract assets and deferred revenue are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or long-term based on the timing of when we expect to complete the related performance obligations and bill the customer. Deferred revenue is classified as current or long-term based on the timing of when we expect to recognize revenue.

The breakdown of revenue recognized related based on the origination of performance obligations and elected accounting expedients is presented in the table below:

(In thousands)

 

Three Months

Ended

March 31, 2019

 

Revenue related to deferred revenue balance at beginning of period

 

$

126,184

 

Revenue related to new performance obligations satisfied during the period

 

 

248,221

 

Revenue recognized under "right-to-invoice" expedient

 

 

55,923

 

Reimbursed travel expenses, shipping and other revenue

 

 

1,721

 

Total revenue

 

$

432,049

 

 

(In thousands)

 

Three Months

Ended

March 31, 2018

 

Revenue related to deferred revenue balance at beginning of period

 

$

181,398

 

Revenue related to new performance obligations satisfied during the period

 

 

200,232

 

Revenue recognized under "right-to-invoice" expedient

 

 

49,403

 

Reimbursed travel expenses, shipping and other revenue

 

 

2,689

 

Total revenue

 

$

433,722

 

The aggregate amount of contract transaction price related to remaining unsatisfied performance obligations (commonly referred to as “backlog”) represents contracted revenue that has not yet been recognized and includes both deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Total backlog equaled $4.0 billion as of March 31, 2019, of which we expect to recognize approximately 38% over the next 12 months, and the remaining 62% thereafter.

Revenue Recognition

We recognize revenue only when we satisfy an identified performance obligation (or bundle of obligations) by transferring control of a promised product or service to a customer. We consider a product or service to be transferred when a customer obtains control because a customer has sole possession of the right to use (or the right to direct the use of) the product or service for the remainder of its economic life or to consume the product or service in its own operations. We evaluate the transfer of control primarily from the customer’s perspective as this reduces the risk that revenue is recognized for activities that do not transfer control to the customer.

The majority of our revenue is recognized over time because a customer continuously and simultaneously receives and consumes the benefits of our performance. The exceptions to this pattern are our sales of perpetual and term software licenses, and hardware, where we determined that a customer obtains control of the asset upon granting of access, delivery or shipment.

 

We disaggregate our revenue from contracts with customers based on the type of revenue and nature of revenue stream, as we believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The below tables summarize revenue by type and nature of revenue stream as well as by our reportable segments:

 

 

Three Months Ended March 31

 

(In thousands)

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

  Recurring revenue

 

$

348,636

 

 

$

352,660

 

  Non-recurring revenue

 

 

83,413

 

 

 

81,062

 

      Total revenue

 

$

432,049

 

 

$

433,722

 

 

 

 

Three Months Ended March 31, 2019

 

(In thousands)

 

Provider

 

 

Veradigm

 

 

Unallocated

 

 

Total

 

Software delivery, support and maintenance

 

$

237,355

 

 

$

34,042

 

 

$

4,115

 

 

$

275,512

 

Client services

 

 

155,252

 

 

 

1,074

 

 

 

211

 

 

 

156,537

 

Total revenue

 

$

392,607

 

 

$

35,116

 

 

$

4,326

 

 

$

432,049

 

 

 

 

Three Months Ended March 31, 2018

 

(In thousands)

 

Provider

 

 

Veradigm

 

 

Unallocated

 

 

Total

 

Software delivery, support and maintenance

 

$

257,754

 

 

$

21,415

 

 

$

1,384

 

 

$

280,553

 

Client services

 

 

152,670

 

 

 

1,392

 

 

 

(893

)

 

 

153,169

 

Total revenue

 

$

410,424

 

 

$

22,807

 

 

$

491

 

 

$

433,722