Organization and Operations (Policies)

6 Months Ended

Jun. 30, 2024

Recent accounting standards not included below are not expected to have a material impact on our consolidated financial position and results of operations.

In November 2023, the Financial Accounting Standards Board ("FASB") issued guidance enhancing the disclosures of reportable segment information, primarily about significant segment expenses. The new standard will be effective for the Company for the annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The adoption of this standard only impacts disclosures and is not expected to have a material impact on the Company's consolidated financial statements.

In December 2023, the FASB issued guidance enhancing income tax disclosure requirements by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction, and providing clarification on uncertain tax positions and related financial statement impacts. The new standard will be effective for the Company on January 1, 2025, with early adoption permitted. The adoption of this standard only impacts disclosures and is not expected to have a material impact on the Company's consolidated financial statements.

Revision of Previously Issued Financial Statements

During the financial close process for the first quarter of 2024, the Company identified an error related to the calculation of contractual credits in one of its third-party vendor agreements which impacted the Company's previously issued financial statements beginning with the quarter ended December 31, 2021. The error impacted subsequent annual and quarterly reporting periods through December 31, 2023. The Company assessed the materiality of the error, in consideration of both quantitative and qualitative factors, and concluded that it is not material to any previously presented interim or annual financial statements. The Company revised its financial statements for the periods impacted. In connection with the revisions, the Company also corrected a previously identified immaterial error related to the recording of certain deferred tax balances.

Changes to the interim consolidated statements of operations for the three and six months ended June 30, 2023, as a result of the error, were as follows (in thousands, except per share data):


Consolidated Statements of Operations and Comprehensive Loss	For the Three Months Ended June 30, 2023
	As Previously Reported			Adjustments			As Revised
	(in thousands)
Cost of revenues - Subscription	$	73,824		$	(2,330	)	$	71,494
Total cost of revenues		87,286			(2,330	)		84,956
Gross profit		441,852			2,330			444,182
Loss from operations		(118,499	)		2,330			(116,169	)
Loss before income tax expense		(105,564	)		2,330			(103,234	)
Income tax expense		(13,382	)		4,813			(8,569	)
Net loss		(118,946	)		7,143			(111,803	)
Comprehensive loss		(119,575	)		7,143			(112,432	)
Net loss per common share, basic and diluted	$	(2.39	)	$	0.14		$	(2.25	)


	For the Six Months Ended June 30, 2023
	As Previously Reported			Adjustments			As Revised
	(in thousands)
Cost of revenues - Subscription	$	142,163		$	(4,047	)	$	138,116
Total cost of revenues		169,332			(4,047	)		165,285
Gross profit		861,426			4,047			865,473
Loss from operations		(163,264	)		4,047			(159,217	)
Loss before income tax expense		(141,583	)		4,047			(137,536	)
Income tax expense		(15,645	)		4,658			(10,987	)
Net loss		(157,228	)		8,705			(148,523	)
Comprehensive loss		(152,723	)		8,705			(144,018	)
Net loss per common share, basic and diluted	$	(3.17	)	$	0.17		$	(3.00	)

Revenues

Disaggregation of Revenue

The Company provides disaggregation of revenue based on geographic region (Note 14) and based on the subscription versus professional services and other classification on the consolidated statements of operations as it believes these best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Deferred Revenue and Deferred Commission Expense

Amounts that have been invoiced are recorded in accounts receivable and deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has not yet been recognized. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as long-term deferred revenue. Deferred revenue during the six months ended June 30, 2024 increased by $34.8 million resulting from $672.0 million of additional invoicing and was offset by revenue recognized of $637.2 million during the same period. $375.2 million of revenue was recognized during the three months ended June 30, 2024 that was included in deferred revenue at the beginning of the period. $520.9 million of revenue was recognized during the six months ended June 30, 2024 that was included in deferred revenue at the beginning of the period. As of June 30, 2024, approximately $867.2 million of revenue is expected to be recognized from remaining performance obligations for contracts with original performance obligations that exceed one year. The Company expects to recognize revenue on approximately 90% of these remaining performance obligations over the next 24 months, with the balance recognized thereafter.

Additional contract liabilities of $6.3 million and $4.5 million were included in accrued expenses and other current liabilities on the consolidated balance sheet as of June 30, 2024 and December 31, 2023.

The incremental direct costs of obtaining a contract, which primarily consist of sales and Solutions Partner commissions paid for new subscription contracts, are deferred and amortized on a straight-line basis over a period of approximately two to four years. The two to four-year period has been determined by taking into consideration the type of product sold, the commitment term of the customer contract, the nature of the Company’s technology development life-cycle, and an estimated customer relationship period. Sales and Solutions Partner commissions for upgrade contracts are deferred and amortized on a straight-line basis over the remaining estimated customer relationship period of the related customer. Deferred commission expense that will be recorded as expense during the succeeding 12-month period is recorded as current deferred commission expense, and the remaining portion is recorded as long-term deferred commission expense.

Deferred commission expense during the three months ended June 30, 2024 increased by $22.2 million as a result of deferring incremental costs of obtaining a contract of $55.1 million and was offset by amortization of $32.9 million during the same period. Deferred commission expense during the six months ended June 30, 2024 increased by $36.7 million as a result of deferring incremental costs of obtaining a contract of $101.7 million and was offset by amortization of $65.0 million during the same period.