Deferred Revenue and Commissions

9 Months Ended

Nov. 01, 2020

Revenue from Contract with Customer [Abstract]

Deferred Revenue and Commissions

Deferred Revenue and Commissions

Deferred Commissions

Deferred commissions consist of incremental costs paid to our sales force to obtain customer contracts. Deferred commissions related to product revenue are recognized upon transfer of control to customers and deferred commissions related to subscription services revenue are amortized over an expected useful life of six years. We determine the expected useful life based on an estimated benefit period by evaluating our technology development life cycle, expected customer relationship period and other factors. We classify deferred commissions as current and non-current on our condensed consolidated balance sheets based on the timing of when we expect to recognize the expense. Amortization of deferred commissions is included in sales and marketing expense in the condensed consolidated statements of operations.

Changes in total deferred commissions during the periods presented are as follows (in thousands): 

	Third Quarter of Fiscal				First Three Quarters of Fiscal
	2020		2021		2020		2021
Beginning balance	$	118,568	$	144,687	$	114,973	$	139,204
Additions	34,071		36,234		82,381		96,530
Recognition of deferred commissions	(29,508)		(28,832)		(74,223)		(83,645)
Ending balance	$	123,131	$	152,089	$	123,131	$	152,089

Of the $152.1 million total deferred commissions balance at the end of the third quarter of fiscal 2021, we expect to recognize approximately 28% as commission expense over the next 12 months and the remainder thereafter.

There was no impairment related to capitalized commissions for the third quarter and first three quarters of fiscal 2020 and 2021.

Deferred Revenue

Deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue including performance obligations pertaining to subscription services. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the condensed consolidated balance sheet dates.

Changes in total deferred revenue during the periods presented are as follows (in thousands):

	Third Quarter of Fiscal				First Three Quarters of Fiscal
	2020		2021		2020		2021
Beginning balance	$	607,263	$	724,751	$	535,920	$	697,288
Additions	142,164		180,285		400,605		467,454
Recognition of deferred revenue	(106,229)		(142,272)		(293,327)		(401,978)
Ending balance	$	643,198	$	762,764	$	643,198	$	762,764

Revenue recognized during the third quarter of fiscal 2020 and 2021 from deferred revenue at the beginning of each respective period was $101.4 million and $121.9 million. Revenue recognized during the first three quarters of fiscal 2020 and 2021 from deferred revenue at the beginning of each respective period was $213.2 million and $285.0 million.

Remaining Performance Obligations

Total contracted but not recognized revenue was $1,010.4 million at the end of the third quarter of fiscal 2021. Contracted but not recognized revenue consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods. The value of orders that are contracted but have not been fulfilled and that can be canceled by customers, are excluded from remaining performance obligations. Of the $1,010.4 million contracted but not recognized revenue at the end of the third quarter of fiscal 2021, we expect to recognize approximately 43% over the next 12 months, and the remainder thereafter.