| Summary of Significant Accounting Policies and Practices | Summary of Significant Accounting Policies and Practices (a) Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (GAAP) in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement have been included. The accompanying condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries primarily located in India, China and Europe. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for other interim periods or future years. The consolidated balance sheet as of December 31, 2017 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Form 10-K for the year ended December 31, 2017 . (b) Use of Estimates The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include the carrying amount of intangibles and goodwill; valuation allowance for receivables and deferred income tax assets; revenue; capitalization of software costs; and valuation of share-based payments. Actual results could differ from those estimates. (c) Revenue from Contracts with Customers Adoption of Accounting Standards Codification Topic 606 Effective January 1, 2018, we adopted the requirements of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606), and all the related amendments (the new revenue standard) using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit as of the adoption date. The comparative information for 2017 has not been restated and continues to be reported under the accounting standards in effect for that period. Revenue Recognition We primarily generate revenue from the sale of subscriptions and subscription-related professional services. In instances involving subscriptions, revenue is generated under customer contracts with multiple elements, which are comprised of (1) subscription fees that provide the customers with access to our on-demand application and content, unspecified solution and content upgrades, and customer support, (2) professional services associated with consulting services (primarily implementation services), and (3) transaction-related fees (including publishing services). Our initial customer contracts usually have contract terms from 3 years to 5 years in length. Typically, the customer does not take possession of the software nor does the customer have the right to take possession of the software supporting the on-demand application service. However, in certain instances, we have customers that take possession of the software whereby the application is installed on the customer’s premises. Our subscription service arrangements typically may only be terminated for cause and do not contain refund provisions. We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, we satisfy a performance obligation The subscription fees typically begin the first month following contract execution, whether or not we have completed the solution’s implementation. In addition, any services performed by us for our customers are not essential to the functionality of our products. Subscription Revenue for Hosted and On-Premise Customers Subscription revenue, which primarily consists of fees to provide customers access to our solution, is recognized ratably over contract terms beginning on the commencement date of each contract, which is the date our service is made available to customers. Typically, 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. Transaction-related revenue is recognized as the transactions occur. Professional Services Revenue for Hosted Customers Professional services revenue primarily consists of fees for deployment of our solution. The majority of professional services contracts are on a time and material basis. When these services are not combined with subscription revenue as a single unit of accounting, as discussed below, this revenue is recognized as the services are rendered for time and material contracts, and when the milestones are achieved and accepted by the customer for fixed price contracts. Professional Services Revenue for On-Premise Customers For customers that take possession of the software, billings for professional services will be recognized as revenue when services are performed, unlike under the previous standard where revenue from these billings was deferred and amortized ratably over the subscription term of the related contract. The adoption of ASC 606 will reduce revenue due to the loss of deferred services revenue from professional services billings delivered prior to December 31, 2017 for on-premise installations of our software. Deferred revenue associated with on-premise professional services at December 31, 2017 will not be amortized in 2018 and beyond. Multiple Performance Obligations Some of our contracts with customers contain multiple performance obligations that generally include subscription, professional services (primarily implementation) as well as transaction-related fees. For contracts with enterprise customers (customers with annual revenues that we believe are greater than $1 billion), we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the solution sold, taking into account the modules included, term of the arrangement, and base transaction volume, customer demographics, and geographic locations. For contracts with mid-market customers (customers with annual revenues that we believe are less than $1 billion), both subscription and professional services are combined and there is only one observable price. For these contracts that bundle the performance obligations into one annual fee, the transaction price is allocated based on the standard professional service rates and implementation hours. Other Revenue Items Sales tax collected from customers and remitted to governmental authorities is accounted for on a net basis and, therefore, is not included in revenue and cost of revenue in the condensed consolidated statements of operations. We classify customer reimbursements received for direct costs paid to third parties and related expenses as revenue, in accordance with ASC 606. Costs to Obtain and Fulfill a Contract We defer commission costs that are incremental and directly related to the acquisition of customer contracts. Commission costs are accrued and deferred upon execution of the sales contract by the customer. Payments to sales personnel are made shortly after the receipt of the related customer payment. Under ASC 606, deferred commissions are amortized over an estimated customer life of 6 years , which differs from the previous standard whereby deferred commissions were amortized over the initial customer contract term. We determined the period of amortization of deferred commissions under ASC 606 by taking into consideration our customer contracts, our technology and other factors. Our commission costs deferred and amortized in the period are as follows: Three Months Ended Six Months Ended 2018 2017 2018 2017 Commission costs deferred $ 1,401,372 $ 1,042,901 $ 2,071,409 $ 1,679,646 Commission costs amortized 1,127,025 1,247,018 2,126,601 2,484,761 Financial Statement Impact of Adopting ASC 606 We adopted ASC 606 using the modified retrospective method. The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made to the following balance sheet accounts as follows: As Reported Adjustments As Adjusted December 31, 2017 Subscription Revenue Professional Services Revenue Cost to Obtain a Contract January 1, 2018 Deferred commissions, current $ 4,400,015 $ — $ — $ (562,607 ) $ 3,837,408 Deferred commissions, non-current 6,734,326 — — 2,211,294 8,945,620 Deferred revenue, current 37,812,239 229,093 (2,170,118 ) — 35,871,214 Deferred revenue, non-current 1,830,706 — (1,418,098 ) — 412,608 Accumulated deficit (167,908,038 ) (229,093 ) 3,588,216 1,648,687 (162,900,228 ) Impact of New Revenue Standard on Financial Statement Line Items In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated balance sheet as of June 30, 2018 and our condensed consolidated statement of operations for the three and six months ended June 30, 2018 is as follows: June 30, 2018 As Reported Balance Without Adoption of ASC 606 Effect of Change Balance Sheet Deferred commissions, current $ 4,271,834 $ 4,618,161 $ (346,327 ) Deferred commissions, non-current 8,456,002 6,057,014 2,398,988 Deferred revenue, current 37,323,361 38,842,476 1,519,115 Deferred revenue, non-current 265,324 1,917,884 1,652,560 Accumulated deficit (169,271,542 ) (174,495,878 ) 5,224,336 Three Months Ended Six Months Ended As Reported Balance Without Adoption of ASC 606 Effect of Change As Reported Balance Without Adoption of ASC 606 Effect of Change Statement of Operations Subscription revenue $ 15,427,422 $ 15,389,328 $ 38,094 $ 30,516,534 $ 30,438,617 $ 77,917 Professional services revenue 5,628,933 5,741,109 (112,176 ) 10,604,213 10,869,578 (265,365 ) Sales and marketing 5,885,177 6,044,815 159,638 11,692,492 12,096,466 403,974 Net loss (3,204,122 ) (3,289,678 ) 85,556 (6,371,314 ) (6,587,840 ) 216,526 Deferred Revenue and Performance Obligations Deferred revenue from subscriptions represents amounts collected from (or invoiced to) customers in advance of earning subscription revenue. Typically, we bill our annual subscription fees in advance of providing the service. Deferred revenue from professional services represents revenue for time and material contracts where the revenue is recognized when milestones are achieved and accepted by the customer for fixed price contracts. June 30, December 31, Current: Subscription revenue $ 37,202,140 $ 35,247,750 Professional services revenue 121,221 2,564,489 Total current 37,323,361 37,812,239 Noncurrent: Subscription revenue 265,324 412,608 Professional services revenue — 1,418,098 Total noncurrent 265,324 1,830,706 Total deferred revenue $ 37,588,685 $ 39,642,945 The amount of subscription revenue and professional services revenue recognized that was included in the beginning balance of deferred revenue is as follows: Three Months Ended Six Months Ended 2018 2017 2018 2017 Subscription revenue $ 12,787,589 $ 11,617,239 $ 25,952,511 $ 23,748,293 Professional services revenue 161,580 508,620 510,802 1,113,588 As of June 30, 2018 , $131,236,306 of revenue is expected to be recognized from remaining performance obligations for subscription contracts and is expected to be recognized over the next 6.7 years . Remaining performance obligations for professional services contracts are recognized within one year or less. (d) Cost of Revenue Cost of subscription revenue . Cost of subscription revenue consists primarily of personnel and related costs of our hosting, support, and content teams, including salaries, benefits, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as software license fees, hosting costs, Internet connectivity, and depreciation expenses directly related to delivering our solutions, as well as amortization of capitalized software development costs. Our cost of subscription revenue is generally expensed as the costs are incurred. Cost of professional services revenue . Cost of professional services revenue consists primarily of personnel and related costs, including salaries, benefits, bonuses, payroll taxes, stock-based compensation, the costs of contracted third-party vendors, reimbursable expenses and allocated overhead. As our personnel are employed on a full-time basis, our cost of professional services is largely fixed in the short term, while our professional services revenue may fluctuate, leading to fluctuations in professional services gross profit. Cost of professional services revenue is generally expensed as costs are incurred. (e) Cash and Cash Equivalents We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents at June 30, 2018 and December 31, 2017 consists of the following: June 30, December 31, Cash $ 7,466,548 $ 9,318,074 Money market accounts 42,107 42,527 $ 7,508,655 $ 9,360,601 (f) Fair Value of Financial Instruments and Fair Value Measurements Our financial instruments consist of cash equivalents, accounts receivable, accounts payable, and accrued expenses. Management believes that the carrying values of these instruments are representative of their fair value due to the relatively short-term nature of those instruments. We follow Financial Accounting Standards Board (FASB) accounting guidance on fair value measurements for financial assets and liabilities measured on a recurring basis. Accounting Standards Codification (ASC) 820, Fair Value Measurements, among other things, defines fair value, establishes a framework for measuring fair value, and requires disclosure about such fair value measurements. Assets and liabilities measured at fair value are based on one or more of three valuation techniques provided for in the standards. The three value techniques are as follows: Market Approach — Prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities; Income Approach — Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques and option pricing models); and Cost Approach — Amount that currently would be required to replace the service capacity of an asset (often referred to as replacement cost). The standards clarify that fair value is an exit price, representing the amount that would be received to sell an asset, based on the highest and best use of the asset, or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for evaluating such assumptions, the standards establish a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities; Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; or Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions about what market participants would use in pricing the asset or liability. The following tables provide the financial assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2018 and December 31, 2017 : Fair Value Measurements at Reporting Date Using June 30, 2018 Total Level 1 Level 2 Level 3 Assets: Cash equivalents - money market accounts $ 42,107 $ 42,107 $ — $ — Restricted cash - money market accounts 56,400 56,400 — — Total assets measured at fair value on a recurring basis $ 98,507 $ 98,507 $ — $ — December 31, 2017 Assets: Cash equivalents - money market accounts $ 42,527 $ 42,527 $ — $ — Restricted cash - money market accounts 56,400 56,400 — — Total assets measured at fair value on a recurring basis $ 98,927 $ 98,927 $ — $ — (g) Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on historical write-off experience, the industry, and the economy. We review our allowance for doubtful accounts monthly. Past-due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance-sheet credit exposure related to our customers. Typically, we record unbilled receivables for contracts on which revenue has been recognized, but for which the customer has not yet been billed. (h) Major Customers and Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. Our customer base is principally comprised of enterprise and mid-market companies within industries including Chemical/Pharmaceutical, High Technology/Electronics, Industrial/Manufacturing, Logistics, Oil & Gas, and Retail/Apparel. We do not require collateral from our customers. For the three and six months ended June 30, 2018 , one customer accounted for 10.8% and 11.5% , respectively, of our total revenue. For the three and six months ended June 30, 2017 , one customer accounted for 10.5% and 11.7% , respectively, of our total revenue. As of June 30, 2018 and December 31, 2017 , no single customer accounted for more than 10% of our total accounts receivable. (i) Geographic Information Disaggregation of Revenue We sell our subscription contracts and related professional services to customers primarily in two geographical markets. Revenue by geographic location based on the billing address of our customers is as follows: Three Months Ended Six Months Ended Country 2018 2017 2018 2017 United States $ 15,924,542 $ 14,878,864 $ 31,162,042 $ 28,945,017 International 5,131,813 4,796,421 9,958,705 9,284,824 Total revenue $ 21,056,355 $ 19,675,285 $ 41,120,747 $ 38,229,841 For the three and six months ended June 30, 2018 and 2017 , no single country other than the United States had revenue greater than 10% of our total revenue. Long-lived assets by geographic location is as follows: Country June 30, December 31, United States $ 8,878,939 $ 8,535,281 International 821,830 834,823 Total long-lived assets $ 9,700,769 $ 9,370,104 (j) Recent Accounting Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The adoption of this standard is not expected to have a material effect on our condensed consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which amends ASC 230, Statement of Cash Flows. This ASU requires that a statement of cash flows explain the change during the reporting period in the total of cash, cash equivalents, and restricted cash or restricted cash equivalents. We adopted this standard on January 1, 2018 using the retrospective transition approach. The adoption of this standard did not have a material effect on our condensed consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230, Statement of Cash Flows. This ASU provides guidance on the statement of cash flows presentation of certain transactions where diversity in practice exists. The adoption of this standard on January 1, 2018 did not have a material effect on our condensed consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements but believe the most significant changes will be related to the recognition of new right-of-use assets and lease liabilities on our balance sheet for real estate operating leases. At June 30, 2018 , we had long-term operating leases with $13,707,184 of remaining minimum lease payments. The new standard will require the present value of these leases to be recorded in the condensed consolidated balance sheets as a right of use asset and lease liability. |
