| The Company and Significant Accounting Policies | The Company and Significant Accounting Policies Description of Business Callidus Software Inc. ("Callidus" or "CallidusCloud") is a global leader in cloud-based sales, marketing, learning and customer experience solutions. CallidusCloud enables its customers to sell more, faster with its Lead to Money suite of solutions that, among other things, identifies leads, trains personnel, implements territory and quota plans, enables sales forces, automates configuration pricing and quoting, manages contracts, streamlines sales compensation, captures customer feedback and provides rich predictive analytics for competitive advantage. Principles of Consolidation The consolidated financial statements include the accounts of Callidus Software Inc. and its wholly-owned subsidiaries (collectively, the "Company"), which include wholly-owned subsidiaries in Australia, Canada, Germany, Hong Kong, India, Ireland, Japan, Malaysia, Mexico, Netherlands, New Zealand, Serbia, Singapore, and the United Kingdom. All intercompany transactions and balances have been eliminated in the consolidation. Use of Estimates Preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principals ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, the reported amounts of revenue and expenses during the reporting period and the accompanying notes. Estimates are used for, but not limited to, the allocation of the value of purchase consideration for business acquisitions and other contingencies, allowances for doubtful accounts, the useful lives of fixed assets and intangible assets, the attainment of performance-based restricted stock units, stock-based compensation forfeiture rates, accrued liabilities and uncertain tax positions. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates such estimates and assumptions on an ongoing basis for continued reasonableness, using historical experience and other factors, including the current economic environment. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such evaluation. Illiquid credit markets, volatile equity and foreign currency markets and fluctuations in information technology spending by prospective customers can increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates. Changes in those estimates, if any, resulting from continuing changes in the economic environment, will be reflected in the consolidated financial statements in future periods. Foreign Currency Translation The Company transacts business in various foreign currencies. In general, the functional currency of a foreign operation is the local country’s currency. Accordingly, the foreign currencies are translated into U.S. Dollars using exchange rates in effect at period end for assets and liabilities and average rates during each reporting period for the results of operations. Adjustments resulting from the translation of the financial statements of the foreign subsidiaries are reported as a separate component of accumulated other comprehensive income (loss) on the consolidated balance sheets. Foreign currency transaction gains and losses are included in interest income and other income (expense), net in the accompanying consolidated statements of comprehensive loss. Derivative Financial Instruments During 2017 and 2016, the Company entered into foreign currency derivative contracts with financial institutions to reduce the risk that its cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. The Company uses forward currency derivative contracts to minimize the Company’s exposure to balances primarily denominated in Euros, Australian dollars, British Pound Sterling and Canadian dollars. The Company’s foreign currency derivative contracts, which are not designated as hedging instruments, are used to reduce the exchange rate risk associated primarily with cash, accounts receivable and intercompany receivables and payables. The Company’s derivative financial instruments program is not designated for trading or speculative purposes. As of December 31, 2017 and 2016, the foreign currency derivative contracts that were not settled were recorded at fair value on the consolidated balance sheets. See Note 5, Fair Value Measurements, for a discussion regarding the valuation of the Company's derivative financial instruments. Foreign currency derivative contracts are marked-to-market at the end of each reporting period with gains and losses recognized as other expense to offset the gains or losses resulting from the settlement or remeasurement of the underlying foreign currency denominated cash, receivables and payables. While the contract or notional amount is often used to express the volume of foreign currency derivative contracts, the amounts potentially subject to credit risk are generally limited to the amounts, if any, by which the counterparties’ obligations under the agreements exceed the obligations of the Company to the counterparties. Business Combinations The Company recognizes assets acquired, liabilities assumed, and contingent consideration at their fair value on the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of assets acquired and liabilities assumed, with a corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of comprehensive loss. See Note 2, Acquisitions, for a discussion of the Company's acquisitions during 2017 and 2016. In addition, uncertainties in income tax and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date. The Company continues to gather information and evaluate these items and records any adjustments to the preliminary estimates to goodwill when the estimates are within the measurement period. Subsequent to the measurement period, changes to these income tax uncertainties and tax related valuation allowances will affect the Company's provision for income taxes in its consolidated statements of comprehensive loss. The Company estimates the fair value of an indemnity holdback payable, which relates to business combinations, based on the contract value. The terms of the holdback payable include standard representations and warranties. The Company estimates the fair value of the contingent consideration issued in business combinations using a probability-based income approach. The fair value of the Company's liability-classified contingent consideration is remeasured at each reporting period, with any changes in the fair value recorded as income or expense. Contingent acquisition consideration payable is included in accrued liabilities on the Company's consolidated balance sheets. Cash and Cash Equivalents and Investments The Company considers all highly liquid instruments with an original maturity on the date of purchase of three months or less to be cash equivalents. Cash equivalents as of December 31, 2017 and 2016 consisted of money market funds. The Company determines the appropriate classification of investment securities at the time of purchase and re-evaluates such designation as of each balance sheet date. As of December 31, 2017 and 2016, all investment securities were designated as "available-for-sale." The Company considers available-for-sale securities that have an original maturity date longer than three months on the date of purchase to be short-term investments, including those investments that have a maturity date of longer than one year that are highly liquid and for which the Company does not have a positive intent to hold to maturity. These securities are carried at estimated fair value based on quoted market prices or other readily available market information, with the unrealized gains and losses included in accumulated other comprehensive income (loss) on the consolidated balance sheets. Recognized gains and losses are included in the consolidated statement of comprehensive loss. When the Company has determined that an other-than-temporary decline in fair value has occurred, the amount of the decline is recognized in earnings. Gains and losses are determined using the specific identification method. Allowance for Doubtful Accounts The Company reduces gross trade accounts receivable with its allowance for doubtful accounts. The allowance for doubtful accounts is the Company's estimate of the amount of probable credit losses in existing accounts receivable. Management analyzes accounts receivable and historical bad debt experience, customer creditworthiness, current economic trends and changes in customer payment history when evaluating the adequacy of the allowance for doubtful accounts. Provisions to the allowance for doubtful accounts are recorded in general and administrative expenses in the Company's consolidated statements of comprehensive loss. Below is a summary of the changes in the Company's allowance for doubtful accounts for 2017 , 2016 and 2015 (in thousands): Balance at Beginning of Year Additions Deductions Balance at End of Year Allowance for doubtful accounts Year ended December 31, 2017 $ 1,536 $ 1,308 $ (864 ) $ 1,980 Year ended December 31, 2016 1,310 1,194 (968 ) 1,536 Year ended December 31, 2015 1,063 912 (665 ) 1,310 Deferred Commissions The asset balance for deferred commissions on the Company's consolidated balance sheets totaled $ 14.6 million and $11.5 million at December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, $ 12.4 million and $9.5 million , respectively, of deferred commissions are included in prepaid and other current assets in total current assets, with the remaining amounts included in deposits and other assets in long-term assets in the consolidated balance sheets. The deferred costs mainly represent commission payments to the Company's direct sales force and third parties for on-demand subscription and maintenance agreements, which the Company amortizes as sales and marketing expense over the non-cancellable term of the contract as the related revenue is recognized. The commission payments are a direct and incremental cost of the revenue arrangements. Property and Equipment, net Property and equipment, net is stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets, generally two to eight years. Leasehold improvements are amortized over the lesser of the assets' estimated useful lives or the related lease terms. Expenditures for maintenance and repairs are expensed as incurred. Cost and accumulated depreciation of assets sold or retired are removed from the respective property accounts and any resulting gain or loss is reflected in the consolidated statements of comprehensive loss. The Company capitalizes certain internal software costs. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred. Internal use software is amortized on a straight line basis over its estimated useful life, generally two to five years. Goodwill, Intangible Assets, Long-Lived Assets and Impairment Assessments Goodwill represents the excess of the purchase price over the fair value of net assets acquired in connection with business combinations. Goodwill is not amortized, but instead goodwill is required to be tested for impairment annually and more frequently under certain circumstances. The Company performs such testing of goodwill in the fourth quarter of each year, and earlier if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company conducts a two-step test for impairment of goodwill. The first step of the test for goodwill impairment compares the fair value of the applicable reporting unit with its carrying value. If the fair value of a reporting unit is less than the reporting unit's carrying value, the Company will perform the second step of the test for impairment of goodwill. During the second step of the test for impairment of goodwill, the Company will compare the implied fair value of the reporting unit's goodwill with the carrying value of that goodwill. If the carrying value of the goodwill exceeds the calculated implied fair value, the excess amount will be recognized as an impairment loss. The Company has one reporting unit and evaluates goodwill for impairment at the entity level. Based upon the results of the step one testing, the Company concluded that no impairment existed as of December 31, 2017 , and did not perform the second step of the goodwill impairment test. Intangible assets with finite lives are amortized over their estimated useful lives of one to twelve years . Generally, amortization is based on the higher of a straight-line method or the pattern in which the economic benefits of the intangible asset will be consumed. There were no material impairment charges related to intangible assets in the years presented. The Company also evaluates the recoverability of its long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to fair value. There were no material impairment charges recorded during the years ended December 31, 2017 , 2016 and 2015 . Deferred Revenue Deferred revenue consists of invoicing and payments received in advance of revenue recognition and is recognized once the revenue recognition criteria are met. The Company invoices its customers annually, quarterly, or in monthly installments. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as non-current deferred revenue. Revenue Recognition The Company generates revenue by providing software as a service ("SaaS") solutions through on-demand subscription and term licenses, related software maintenance associated with the Company's existing on-premise solution, and professional services. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Recurring Revenue. Recurring revenue, which includes SaaS revenue and maintenance revenue, is recognized ratably over the stated contractual period. SaaS revenue consists of subscription fees from customers accessing the Company's cloud-based service offerings. Maintenance revenue consists of fees from customers purchasing licenses and receiving support for such on-premise solutions. The Company also recognizes SaaS and maintenance revenue associated with customers using its products in excess of contracted usage ("Overages"). Overages are primarily attributed to SaaS products and such Overages are recorded in SaaS revenue in the period incurred. Revenue related to Overages was immaterial for all years presented. Service and License Revenue. Service and license revenue primarily consists of training, integration and configuration services. Generally, the Company's professional services arrangements are billed on a time-and-materials basis. Time and material services are recognized as the services are rendered based on inputs to the project, such as billable hours incurred. For fixed-fee professional services arrangements, the Company recognizes revenue under the proportional performance method of accounting and estimates the proportional performance on a monthly basis, utilizing hours incurred to date as a percentage of total estimated hours to complete the project. If the Company does not have a sufficient basis to measure progress toward completion, revenue is recognized upon completion. Service and license revenue also includes revenue from perpetual licenses, which is recognized upon delivery of the product, using the residual method, assuming all the other conditions for revenue recognition have been met. Revenue related to perpetual licenses was immaterial for all the years presented. In a limited number of arrangements with non-standard acceptance criteria, the Company defers the revenue until the acceptance criteria are satisfied. Reimbursements, including those related to travel and out-of-pocket expenses, are included in services and license revenue, and an equivalent amount of reimbursable expenses is included in cost of services and license revenue. In general, recurring revenue agreements are entered into for 12 to 36 months, and the professional services are performed within nine months of entering into a contract with the customer, depending on the size of integration. SaaS agreements provide specified service level commitments, excluding scheduled maintenance. The failure to meet this level of service availability may require the Company to credit qualifying customers a portion of their subscription and support fees. Based on the Company's historical experience meeting its service level commitments, the Company does not currently have any liabilities on its balance sheet for these commitments. The Company recognizes revenue when all of the following conditions are met: • Persuasive evidence of an arrangement exists; • Delivery has occurred or services have been rendered; • The fees are fixed or determinable; and • Collection of the fees is reasonably assured. If the Company determines that any one of the four criteria is not met, it will defer recognition of revenue until all the criteria are met. Multiple-deliverable arrangements with on-demand subscription. For on-demand subscription agreements with multiple deliverables, the Company evaluates each element to determine whether it represents a separate unit of accounting. The Company determines the best estimated selling price of each deliverable in an arrangement based on a selling price hierarchy of methods contained in Finance Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2009-13, "Revenue Recognition (Accounting Standards Codification (“ASC”) Topic 605)- Multiple-Deliverable Revenue Arrangements." The best estimated selling price for a deliverable is based on its vendor-specific objective evidence (“VSOE”), if available, third-party evidence (“TPE”), if VSOE is not available, or estimated selling price (“ESP”), if neither VSOE nor TPE is available. Total arrangement fees are allocated to each element using the relative selling price method. The Company has currently established VSOE for most deliverables, except for fixed fee service arrangements and on-premise software licenses. The Company considered all of the following factors to establish the ESP for fixed fee service arrangements when sold with its on-demand services: the weighted average actual sales prices of professional services sold on a stand-alone basis for on-demand services; average billing rates for fixed fee service agreements when sold with on-demand services, cost plus a reasonable mark-up and other factors such as gross margin objectives, pricing practices and growth strategy. Multiple-deliverable arrangements with on-premise license. For arrangements with multiple deliverables, including license, professional services and maintenance, the Company recognizes license revenue using the residual method of accounting pursuant to the requirements of the guidance contained in ASC 985-605, " Software Revenue Recognition. " Under the residual method, revenue is recognized when VSOE for fair value exists for all of the undelivered elements in the arrangement, but does not exist for one or more of the delivered elements in the arrangement. If evidence of fair value cannot be established for the undelivered elements, all of the revenue is deferred until evidence of fair value can be established, or until the items for which evidence of fair value cannot be established are delivered. For maintenance and certain professional services, the Company has established VSOE because it has a sufficient history of selling these deliverables at an established price. The Company's revenue arrangements do not include a general right of return relative to the delivered products. Generally, for the Company's term-based licenses, if the only undelivered element is maintenance, the entire amount of revenue is recognized ratably over the maintenance period. Sales and other taxes collected from customers to be remitted to government authorities are excluded from revenue. Cost of Revenue Cost of recurring revenue consists primarily of salaries, benefits, allocated overhead costs related to on-demand operations and technical support personnel, as well as allocated amortization of purchased technology. Cost of services revenue consists primarily of salaries, benefits, travel and allocated overhead costs related to consulting, training and other professional services personnel, including cost of services provided by third-party consultants engaged by the Company. Cost of license revenue consists primarily of amortization of purchased technology. Restructuring and Other Expenses Restructuring and other expenses are comprised primarily of employee termination costs related to headcount reductions, costs related to properties abandoned in connection with facilities consolidation including estimated losses related to excess facilities based upon the Company's contractual obligations, net of estimated sublease income and related write-downs of leasehold improvements and impairment of intangible assets. The Company reassesses the liability for excess facilities periodically based on market conditions. Restructuring and other expense was $1.2 million , $0.5 million and $0.6 million during the years 2017, 2016 and 2015, respectively. Research and Development The Company expenses the cost of research and development as incurred. Research and development expenses consist primarily of expenses for research and development staff, the cost of certain third-party service providers and allocated overhead. Stock-Based Compensation Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized on a straight-line basis over the requisite service period, which is generally the vesting period. Stock-based compensation expense for restricted stock units is estimated based on the closing price of the Company's common stock on the date of grant and the estimated forfeiture rate, which is based on historical forfeitures. The Company measures stock-based compensation expense for employee stock purchase plan shares using the Black-Scholes-Merton option pricing model. These variables include: the expected term of the plan, taking into account projected exercises; the Company's expected stock price volatility over the expected term of the awards; the risk-free interest rate; and expected dividends. The Company estimates forfeiture rate based on an analysis of actual forfeitures and they will continue to evaluate the adequacy of the forfeiture rate based on actual forfeiture experience and other factors. Changes in these variables could affect stock-based compensation expense in the future. The Company granted performance-based restricted stock units ("PSUs") to select executives and other key employees. Vesting of the Company's PSUs is based on achievement of specified company or other goals. In 2017, the Company granted performance-based restricted stock units with vesting contingent on successful attainment of annualized SaaS revenue growth and Non-GAAP annual operating margin targets over the three-year period from January 1, 2017 through December 31, 2019. In 2016, the Company granted PSU's with vesting contingent on attainment of pre-set quota for the EMEA region over the three-year period from January 1, 2016 through December 31, 2018. The Company also granted PSUs to its CEO with vesting contingent upon the Company's relative total shareholder return over a three year period (2016-2018) compared to the Company's 2016 executive compensation peer group companies. In 2015, the Company granted PSUs with vesting contingent on its annualized SaaS revenue growth over the three-year period from July 1, 2015 to June 30, 2018. In 2014, the Company granted PSUs with vesting contingent on its annualized SaaS revenue growth over the three-year period from January 1, 2014 to December 31, 2016, and on the Company's relative total shareholder return over the same three-year period compared to an index of 17 SaaS companies. These PSUs will, to the extent the performance criteria are achieved, vest on the third anniversary of the grant date. PSU awards based on total shareholder return are recognized as compensation costs over the requisite service period, if rendered, even if the market condition is never satisfied. In determining the fair value of PSUs based on total shareholder return the Company considered the achievement of the market condition in the estimated fair value. Advertising Costs The Company expenses advertising costs in the period incurred. Advertising expense was $4.5 million , $3.8 million , and $2.1 million for 2017 , 2016 and 2015 , respectively. Income Taxes The Company is subject to income and foreign withholding taxes in both the United States and foreign jurisdictions and the Company uses estimates in determining its provision for income taxes. This process involves estimating actual current tax assets and liabilities together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded on the consolidated balance sheets. Net deferred tax assets are recorded to the extent the Company believes that it is more-likely-than-not to be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. Except for the net deferred tax assets of some of the Company's foreign subsidiaries, the Company maintained a full valuation allowance against its net deferred tax assets at December 31, 2017 because the Company believes that it is not more-likely-than-not that the gross deferred tax assets will be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, in the event the Company was able to determine that it would be able to realize the deferred tax assets in the future, an adjustment to the valuation allowance would increase net income in the period such determination was made. The Company regularly reviews its tax positions and benefits to be realized. The Company recognizes tax liabilities based upon its estimate of whether, and the extent to which, additional taxes will be due when such estimates are more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company recognizes interest and penalties related to income tax matters as income tax expense. Interest or penalties associated with unrecognized tax benefits was immaterial for all the years presented. Comprehensive Income (Loss) Comprehensive income (loss) is the total of net income (loss), unrealized gains and losses on investments and foreign currency translation adjustments. Unrealized gains and losses on investments and foreign currency translation adjustment amounts are excluded from net loss and are reported in accumulated other comprehensive income (loss) on the consolidated balance sheets. Recently Adopted Accounting Pronouncements In March 2016, the FASB issued Accounting Standards Update ("ASU") 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting , which simplifies various aspects related to the accounting and presentation of stock-based payments. The amendments require entities to record all tax effects related to stock- based payments at settlement or expiration through the income statement and the windfall tax benefit to be recorded when it arises, subject to normal valuation allowance considerations. All tax-related cash flows resulting from the stock-based payments are required to be reported as operating activities in the statement of cash flows. Further, the amendments allow entities to make an accounting policy election to either estimate forfeitures or recognize forfeitures as they occur. The Company adopted this guidance on January 1, 2017 on a prospective basis. Adoption of the new standard did not have a material impact to the Company's consolidated financial statements and resulted in the recognition of excess tax benefits to the Company's income taxes rather than paid-in capital. The Company elected to continue to estimate forfeitures expected to occur to determine the amount of compensation cost to be recognized in each period. Recently Issued, But Not Yet Adopted Accounting Pronouncements In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting , which amends the scope of modification accounting for stock-based payment arrangements, provides guidance on the types of changes to the terms or conditions of stock-based payment awards to which an entity would be required to apply modification accounting under ASC 718, Compensation- Stock Compensation . This ASU is effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash , which requires that a statement of cash flows explain the change during the period for the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The guidance is effective for the Company's fiscal year beginning January 1, 2018. Restricted cash will be included as a component of cash, cash equivalents, and restricted cash on the Company's consolidated statement of cash flows. The inclusion of restricted cash will increase the beginning and ending balances of the consolidated statement of cash flows by $1.4 million . In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments . The guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice for certain cash receipts and cash payments. The amendments in this guidance are effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Entities are permitted to adopt the standard early in any interim or annual period, and a retrospective application is required. While the Company continues to assess the impact of this standard, it does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of key informat |
