REVENUE RECOGNITION

9 Months Ended

Sep. 30, 2022

REVENUE RECOGNITION

REVENUE RECOGNITION

2.     REVENUE RECOGNITION

See Note 1, “Summary of Significant Accounting Policies”, for a description of the Company’s revenue recognition accounting policy.

Disaggregation of revenue

The table reflects revenue by major source for the following periods:

	Three months ended September 30,				Nine months ended September 30,
		2022	2021			2022	2021
	(unaudited)				(unaudited)
Software subscriptions:
Software licenses	$	62,589	$	58,932	$	182,320	$	172,807
Cloud subscriptions		43,779		33,344		122,267		92,353
Software subscriptions		106,368		92,276		304,587		265,160
Services		19,870		18,442		55,911		48,732
Total revenues	$	126,238	$	110,718	$	360,498	$	313,892

Contract balances

Timing of revenue recognition may differ from the timing of invoicing customers. A receivable is recorded in the condensed consolidated balance sheets when customers are billed related to revenue to be collected and recognized for subscription agreements as there is an unconditional right to invoice and receive payment in the future related to these subscriptions. A receivable and related revenue may also be recorded in advance of billings to the extent services have been performed and the Company has a right under the contract to bill and collect for such performance. Subscription-based customers are generally invoiced annually at the beginning of each annual subscription period. Accounts receivable is presented net of an allowance for potentially uncollectible accounts and estimated cancellations of software license and

cloud-based subscriptions (the “allowance”) $9,620 and $9,151 at September 30, 2022 and December 31, 2021, respectively. The allowance for potentially uncollectible accounts represents future expected credit losses over the life of the receivables based on past experience, current information and forward-looking economic considerations.

The beginning and ending balances of accounts receivable, net of allowance, are as follows:

	For the nine months ended September 30, 2022		For the year ended December 31, 2021
	(unaudited)
Balance, beginning of period	$	76,929	$	77,159
Balance, end of period		94,529		76,929
Increase (decrease), net	$	17,600	$	(230)

A contract liability is recorded as deferred revenue on the condensed consolidated balance sheets when customers are billed in advance of performance obligations being satisfied, and revenue is recognized after invoicing ratably over the subscription period or over the amortization period of material rights. Deferred revenue is reflected net of a related deferred allowance for subscription cancellations (the “deferred allowance”) of $6,954 and $6,537 at September 30, 2022 and December 31, 2021, respectively. The deferred allowance represents the portion of the allowance for subscription cancellations associated with deferred revenue.

The beginning and ending balances of and changes to the allowance and the deferred allowance are as follows:

	For the three months ended September 30,
	2022				2021
	Balance			Net Change	Balance			Net Change
	(unaudited)
Allowance balance, July 1,	$	(8,719)			$	(9,399)
Allowance balance, September 30,		(9,620)				(8,845)
Change in allowance			$	901			$	(554)
Deferred allowance balance, July 1,		6,700				6,267
Deferred allowance balance, September 30,		6,954				6,284
Change in deferred allowance				(254)				(17)
Net amount charged to revenues			$	647			$	(571)
	For the nine months ended September 30,
	2022				2021
	Balance			Net Change	Balance			Net Change
	(unaudited)
Allowance balance, January 1,	$	(9,151)			$	(8,592)
Allowance balance, September 30,		(9,620)				(8,845)
Change in allowance			$	469			$	253
Deferred allowance balance, January 1,		6,537				6,432
Deferred allowance balance, September 30,		6,954				6,284
Change in deferred allowance				(417)				148
Net amount charged to revenues			$	52			$	401

The portion of deferred revenue expected to be recognized in revenue beyond one year is included in deferred revenue, net of current portion in the condensed consolidated balance sheets. The tables provide information about the balances of and changes to deferred revenue for the following periods:

	As of September 30,		As of December 31,
	2022		2021
	(unaudited)
Balances:
Deferred revenue, current	$	242,637	$	237,344
Deferred revenue, non-current		11,098		11,666
Total deferred revenue	$	253,735	$	249,010

	For the three months ended September 30,				For the nine months ended September 30,
	2022		2021		2022		2021
	(unaudited)				(unaudited)
Changes to deferred revenue:
Beginning balance	$	255,074	$	222,612	$	249,010	$	222,262
Additional amounts deferred		124,899		110,686		365,223		314,210
Revenues recognized		(126,238)		(110,718)		(360,498)		(313,892)
Ending balance	$	253,735	$	222,580	$	253,735	$	222,580

Contract costs

Deferred sales commissions earned by the Company’s sales force and certain sales incentive programs and vendor referral agreements are considered incremental and recoverable costs of obtaining a contract with a customer. An asset is recognized for these incremental contract costs and reflected as deferred commissions in the condensed consolidated balance sheets. These contract costs are amortized on a straight-line basis over a period consistent with the transfer of the associated product and services to the customer, which is generally three years. Amortization of these costs are included in selling and marketing expense in the condensed consolidated statements of comprehensive loss. The Company periodically reviews these contract assets to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these assets. There were no impairment losses recorded for the periods presented.

The changes to contract cost balances as of and for the following periods are:

	For the three months ended September 30,				For the nine months ended September 30,
	2022		2021		2022		2021
	(unaudited)				(unaudited)
Deferred commissions:
Beginning balance	$	12,168	$	11,545	$	12,555	$	11,743
Additions		3,248		3,866		7,904		8,059
Amortization		(1,659)		(2,828)		(6,702)		(7,219)
Ending balance	$	13,757	$	12,583	$	13,757	$	12,583