Summary of significant accounting policies

3 Months Ended

Mar. 31, 2023

Summary of significant accounting policies

The Company’s significant accounting policies are discussed in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to these policies during the three months ended March 31, 2023. The following describes the impact of certain policies.

Trade accounts receivable, net

The allowance for credit losses is based on an expected loss model that estimates losses over the expected life of the trade accounts receivable. The Company estimates expected credit losses based on the Company’s historical loss information, current and future economic and market conditions, and ongoing review of customers’ account balances.

Activity related to our allowance for credit losses for trade accounts receivable was as follows:


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Balance, beginning of period	$	445	$	391
Provision	14		122
Write-offs	(55)		(27)
Recoveries of amounts previously written off	23		6
Balance, end of period	$	427	$	492

Revenue recognition

The Company applies ASC 606 and follows a five-step model to determine the appropriate amount of revenue to be recognized in accordance with ASC 606.

Disaggregation of Revenue

The Company separates revenue into subscription and non-subscription categories to disaggregate those revenues that are term-based and renewable from those that are one-time in nature. Revenue from subscription and non-subscription contractual arrangements were as follows:


	Three Months Ended March 31,
	2023		2022
	(in thousands)
SaaS subscription and support and maintenance	$	120,762	$	96,350
On‑premise subscription	6,468		5,851
Subscription revenue	127,230		102,201
Professional services	4,384		3,944
Perpetual licenses	598		2,113
Non‑subscription revenue	4,982		6,057
Total revenue	$	132,212	$	108,258

Contract Balances

If revenue is recognized in advance of the right to invoice, a contract asset is recorded in other current assets on the condensed consolidated balance sheets. The opening and closing balances of contract assets were as follows:


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Balance, beginning of the period	$	817	$	1,792
Balance, end of the period	636		1,885
Change	$	(181)	$	93

For the three months ended March 31, 2023 and 2022, the allowance for expected credit losses associated with contract assets was not material.

Contract liabilities consist of customer billings in advance of revenue being recognized. The Company invoices its customers for subscription, support and maintenance, and services in advance. Changes in contract liabilities, including revenue earned during the period from the beginning contract liability balance and new deferrals of revenue during the period, were as follows:


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Balance, beginning of the period	$	346,150	$	282,128
Revenue earned	(107,595)		(85,337)
Deferral of revenue	103,895		95,708
Other (1)	(1,608)		—
Balance, end of the period	$	340,842	$	292,499

(1) Includes contract assets netted against contract liabilities on a contract-by-contract basis.

There were no significant changes to our contract assets and liabilities during the three months ended March 31, 2023 and 2022 outside of our sales activities.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and noncancellable amounts to be invoiced. As of March 31, 2023, the Company had $424.5 million of remaining performance obligations, with 72% expected to be recognized as revenue over the succeeding 12 months, and the remainder generally expected to be recognized over the three years thereafter.

Deferred Contract Costs

Sales commissions, as well as associated payroll taxes and retirement plan contributions (together, contract costs), that are incremental to the acquisition of customer contracts are capitalized using a portfolio approach as deferred contract costs in the condensed consolidated balance sheets when the period of benefit is determined to be greater than one year.

Total amortization of contract costs was $4.8 million and $3.8 million for the three months ended March 31, 2023 and 2022, respectively.

The Company periodically reviews these deferred contract costs to determine whether events or changes in circumstances have occurred that could affect the period of benefit of these deferred contract costs. There were no impairment losses recorded during the three months ended March 31, 2023 and 2022.

Strategic investments

In the third quarter of 2022, the Company executed a $2.0 million convertible promissory note with SwiftConnect. The note contains customary terms for an instrument of its type, including repayment or conversion upon certain future liquidity events. The note matures on July 29, 2024, and the Company intends to hold the note until maturity, unless it is otherwise repaid or converted pursuant to its terms. The investment is recorded at cost and included in other assets on the condensed consolidated balance sheets. As of both March 31, 2023 and December 31, 2022, the balance of the investment was $2.0 million. The Company evaluates its strategic investments quarterly for impairment. During the period ended March 31, 2023, there were no changes in the carrying value of the Company’s strategic investments. All gains and losses on the Company’s strategic investments, whether realized or unrealized, are recognized in the condensed consolidated statements of operations.