| Summary of Significant Accounting Policies and Recent Accounting Pronouncements | Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements Revenue Recognition and Deferred Revenue The Company generates revenue primarily from two sources: (1) subscription services which is comprised of revenue from subscription fees from customers accessing the Company’s cloud-based software and (2) professional services and other revenue, which consists primarily of fees from consultation services to support business process mapping, configuration, data migration, integration, and training. Subscription services revenue is recognized on a ratable basis over the related subscription period beginning on the date the customer is first given access to the system (i.e., provision date). The Company's professional service revenue contracts are generally time and material based and revenue is recognized as the service is provided. Certain contracts are fixed priced arrangements where the revenue is recognized using a proportional performance method. In most cases, the customers do not have the contractual right to take possession of the Company’s software. However, certain contracts inherited with the Company’s acquisition of Leeyo do give the customer the right to take possession of the software. These contracts are described below under “Leeyo On-Premise Arrangements.” The Company commences revenue recognition when all of the following conditions are met: • there is persuasive evidence of an arrangement; • the service is being provided to the customer; • the collection of the fees is reasonably assured; and • the amount of fees to be paid by the customer is fixed or determinable. Revenue from new customers is often generated under subscription agreements with multiple elements, comprised of subscription services fees from customers accessing its on-demand application suite and professional services associated with implementation services. The Company evaluates each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has stand-alone value and delivery of the undelivered element is probable and within the Company’s control. Subscription services have stand-alone value because they are routinely sold separately by the Company. Professional services have stand-alone value because the Company has sold professional services separately and there are several third-party vendors that routinely contract directly with the customer and provide these services to the customer on a stand-alone basis. For cloud-based software subscription services revenue and professional services revenue, the Company allocates revenue to each element in an arrangement based on a selling price hierarchy. The selling price for an element 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. The Company determines whether VSOE can be established for elements of its arrangements by reviewing the prices at which such elements are sold in stand-alone arrangements. Through January 31, 2019, the Company has not established VSOE or TPE for any of the elements of the Company's arrangements. Therefore, the Company utilizes the ESP for all its elements. The Company establishes ESP for both its cloud-based subscriptions services and professional services elements primarily by considering the actual sales prices of the element when sold on a stand-alone basis or when sold together with other elements. The consideration allocated to subscription services is typically recognized as revenue over the noncancelable contract period on a straight-line basis. The consideration allocated to professional services is typically recognized as revenue once the revenue recognition criteria have been met based on a proportional performance method for fixed price engagements or as the service is being provided for time and material based contracts. 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. Other than a small number of "Leeyo On-Premise Arrangements" most arrangements with customers do not provide the customer with the right to take possession of the software supporting the on-demand application service. Sales and other taxes collected from customers to be remitted to government authorities are reported on a net basis and, therefore, excluded from revenue. The Company classifies reimbursements received from clients for out-of-pocket expenses as professional services revenue as incurred. Subscription agreements generally have terms ranging from one to three years and are generally invoiced annually or quarterly in advance over the term. The professional services component of the arrangements is generally earned during the first year of the subscription period depending on the size and complexity of the business utilizing the platform service. The subscription agreements occasionally provide service-level uptime commitments per period, excluding scheduled maintenance. The failure to meet this level of service availability may require the Company to credit qualifying customers up to the value of an entire month of their platform fees. Based on the Company’s historical experience of consistently meeting its service-level commitments, the Company does not currently have any reserves for these commitments. Leeyo On-Premise Arrangements The Company acquired Leeyo on May 31, 2017. Leeyo had previously entered into some legacy customer agreements where the customer was entitled to take possession of the software on its premises. These arrangements were typically sold through a term license (term-based license). Term-based license revenue contracts where the customer is entitled to take possession of the software are governed by ASC 985-605, Software — Revenue Recognition. For term-based license arrangements, the Company sells the software license and related maintenance as a bundle and recognizes the total contracted amount ratably over the term of the arrangement beginning upon delivery of the software once the revenue recognition criteria have been met. The Company is not able to establish VSOE for the maintenance and support for those licenses as those elements are not sold separately. For term-based licenses sold with professional services, the entire arrangement consideration including professional services is recognized ratably over the term of the term-based license. Term-based license revenue and related maintenance (PCS) are included in subscription revenue in the Company’s consolidated statements of comprehensive loss and were less than 5% of consolidated revenues for the year ended January 31, 2019. Cost of Revenue Cost of subscription revenue primarily consists of costs relating to the hosting of the Company’s cloud-based software platform, including salaries and benefits of technical operations and support personnel, data communications costs, allocated overhead and property and equipment depreciation, and the amortization of internal-use software and purchased intangibles. Cost of professional services revenue primarily consists of the costs of delivering implementation services to customers of the Company’s cloud-based software platform, including salaries and benefits of professional services personnel and fees for third party resources used in the delivery of implementation services. Advertising Expense Advertising costs are expensed as incurred. For the periods presented, advertising expense was not material. Concentrations of Credit Risk and Significant Clients and Suppliers The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable, and restricted cash. The Company deposits its cash and restricted cash, and short-term investments, primarily with one financial institution, and accordingly, such deposits regularly exceed federally insured limits. No single customer accounted for more than 10% of the Company’s revenue or accounts receivable balance in any of the periods presented. Geographical Information Revenue by country from customers, based on the customer’s address at the time of sale, was as follows (in thousands): Fiscal Year Ended January 31, 2019 2018 2017 United States $ 166,770 $ 125,275 $ 83,385 Others 68,426 42,651 29,623 Total $ 235,196 $ 167,926 $ 113,008 Other than the United States, no individual country exceeded 10% of total revenue for fiscal 2019, 2018 and 2017 . Property and equipment by geographic location is based on the location of the legal entity that owns the asset. As of January 31, 2019 , the majority of the Company’s property and equipment was located in the United States. Deferred Offering Costs Deferred offering costs consist primarily of accounting, legal and other fees related to the Company’s IPO. Upon completion of the offering, these costs are offset against the offering proceeds within the consolidated statements of stockholders’ equity. There was $0.2 million in deferred offering costs outstanding as of January 31, 2019, and as of January 31, 2018 there was $2.5 million in deferred offering costs in prepaid expenses and other current assets in the consolidated balance sheets. Cash and Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with original or remaining maturities of three months or less on the purchase date to be cash equivalents. Cash and cash equivalents carrying value approximate fair value and consist primarily of bank deposits and money market funds. Restricted cash consists of letters of credit held with the Company’s financial institution related to facility and equipment leases, and are classified as current or long-term in the Company’s consolidated balance sheets based on the maturities of the underlying letters of credit. Short-term Investments The Company typically invests in high quality, investment grade securities from diverse issuers. The Company classifies its short-term investments as available-for-sale. In general, these investments are free of trading restrictions. The Company carries these investments at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in the Company’s consolidated balance sheets. Gains and losses are recognized when realized in the Company's consolidated statements of comprehensive loss. When the Company has determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method. The Company reviews its debt securities classified as short-term investments on a regular basis to evaluate whether or not any security has experienced an other-than-temporary decline in fair value. The Company considers factors such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and our intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of the investment’s amortized cost basis. If the Company believes that an other-than-temporary decline exists in one of these securities, it will write down these investments to fair value. The portion of the write-down related to credit loss would be recorded to interest and other income (expense), net in our consolidated statements of comprehensive loss. Any portion not related to credit loss would be recorded to accumulated other comprehensive income, which is reflected as a separate component of stockholders' equity in our consolidated balance sheets. The Company may sell its short-term investments at any time, without significant penalty, for use in current operations or for other purposes, even if they have not yet reached maturity. As a result, the Company has classified its investments, including any securities with maturities beyond 12 months, as current assets in the accompanying consolidated balance sheet as of January 31, 2019 . Securities with original or remaining maturities of three months or less on the purchase date are considered to be cash equivalents and are reflected in cash and cash equivalents in the accompanying consolidated balance sheet as of January 31, 2019 . The Company did not hold any short-term investments as of January 31, 2018 . Accounts Receivable The Company’s accounts receivable consists of client obligations due under normal trade terms, and are reported at the principal amount outstanding, net of the allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts that is based upon historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss related to problem accounts. The allowance for doubtful accounts consists of the following activity (in thousands): Fiscal Year Ended January 31, 2019 2018 Allowance for doubtful accounts, beginning balance $ 3,292 $ 2,572 Additions: Charged to revenue 3,949 3,306 Charged to deferred revenue 4,719 2,419 Deductions: Write-offs to revenue (4,253 ) (2,686 ) Write-offs to deferred revenue (5,185 ) (2,319 ) Allowance for doubtful accounts, ending balance $ 2,522 $ 3,292 Property and Equipment, Net Property and equipment are stated at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of the related assets, generally three to five years. Leasehold improvements are depreciated over the shorter of their remaining related lease term or estimated useful life. When assets are retired, the cost and accumulated depreciation are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in operating expenses in the accompanying consolidated statements of comprehensive loss. Business Combinations When the Company acquires a business, management allocates the purchase price to the net tangible and identifiable intangible assets acquired. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. Goodwill, Acquired Intangible Assets, and Impairment Assessment of Long-Lived Assets Goodwill. Goodwill represents the excess purchase consideration of an acquired business over the fair value of the net tangible and identifiable intangible assets. Goodwill is evaluated for impairment annually on December 1, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate or a significant decrease in expected cash flows. An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit’s fair value, not to exceed the carrying amount of goodwill. The Company has the option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount and determine whether further action is needed. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative impairment test is unnecessary. No impairment charges were recorded during fiscal 2019 , 2018 or 2017 . Acquired Intangible Assets. Acquired intangible assets consist of developed technology, customer relationships, and a trade name, resulting from the Company’s acquisitions. Acquired intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives on a straight-line basis. Impairment of Long-Lived Assets. The carrying amounts of long-lived assets, including property and equipment, capitalized internal-use software, and acquired intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future undiscounted net cash flows the asset is expected to generate over its remaining life. If the asset is determined to be impaired, the amount of any impairment recognized is measured as the difference between the carrying value and the fair value of the impaired asset. If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the new shorter useful life. There were no material impairments recognized for fiscal 2019 , 2018 or 2017 . Internal-Use Software and Web Site Development Costs The Company capitalizes costs related to developing new functionality for its suite of products that are hosted by the Company and accessed by its customers on a subscription basis. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. 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 and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalized costs are recorded as part of property and equipment, net in our consolidated balance sheets. Maintenance and training costs are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life, generally three years. There were no impairments to internal-use software during fiscal 2019, 2018 and 2017 . The Company did not incur any significant website development costs during the periods presented. The Company capitalized $2.3 million , $1.2 million and $2.3 million in internal-use software during fiscal 2019 , 2018 and 2017 , respectively. Amortization expense of internal-use software and website development costs for fiscal 2019, 2018 and 2017 was $1.3 million , $1.2 million , and $0.5 million , respectively, and is included in cost of subscription revenue in the consolidated statements of comprehensive loss. Income Taxes The Company uses the asset-and-liability method of accounting for income taxes. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce its deferred tax assets to the net amount that the Company believes is more likely than not to be realized. In assessing the need for a valuation allowance, the Company has considered its historical levels of income, expectations of future taxable income and ongoing tax planning strategies. Because of the uncertainty of the realization of the deferred tax assets in the U.S., the Company has recorded a full valuation allowance against its deferred tax assets. Realization of its deferred tax assets is dependent primarily upon future U.S. taxable income. The Company recognizes and measures tax benefits from uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions. Although the Company believes that it has adequately reserved for its uncertain tax positions, it can provide no assurance that the final tax outcome of these matters will not be materially different. The Company evaluates its uncertain tax position on a regular basis and evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of an audit and effective settlement of audit issues. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on the Company’s financial condition and results of operations. The provision for income taxes includes the effects of any accruals that the Company believes are appropriate, as well as the related net interest and penalties. Stock-Based Compensation The Company measures its employee and director stock-based compensation awards, including purchase rights issued under the Company's ESPP, based on the award's estimated fair value on the date of grant. Expense associated with these awards is recognized using the straig ht-line attribution method over the requisite service period for stock options, RSUs and restricted stock; and over the offering period for the purchase rights issued under the ESPP, and is reported in the Company's consolidated statements of comprehensive loss. The Company estimates the fair value of its stock options, and purchase rights under the ESPP, using the Black-Scholes option-pricing model. The resulting fair value, net of estimated forfeitures, is recognized on a straight-line basis over the period during which an employee is required to provide service in exchange for the award. Stock options generally vest over two to four years and have a contractual term of ten years. ESPP purchase rights generally vest over the two year offering period. The Company estimates the fair value of its restricted stock and RSU grants based on the grant date fair value of the Company’s common stock. The resulting fair value, net of estimated forfeitures, is recognized on a straight-line basis over the period during which an employee is required to provide service in exchange for the award, which is generally three to four years. Estimated forfeitures are based upon the Company’s historical experience and the Company revises its estimates, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Determining the grant date fair value of options, restricted stock, and RSUs requires management to make assumptions and judgments. These estimate s involve inherent uncertainties and if different assumptions had been used, stock-based compensation expense could have been materially different from the amounts recorded. The assumptions and estimates for valuing stock options are as follows: • Fair value per share of Company’s common stock. Prior to the IPO, because there was no public market for the Company’s common stock, the Company’s Board of Directors, with the assistance of a third-party valuation specialist, determined the common stock fair value at the time of the grant of stock options by considering a number of objective and subjective factors, including the Company’s actual operating and financial performance, market conditions and performance of comparable publicly traded companies, developments and milestones in the Company, the likelihood of achieving a liquidity event, and transactions involving the Company’s common stock, among other factors. After the IPO, the Company used the publicly quoted price of its common stock as reported on the New York Stock Exchange as the fair value of its common stock. • Expected volatility. The Company determines the expected volatility based on historical average volatilities of similar publicly traded companies corresponding to the expected term of the awards. • Expected term. The Company determines the expected term of awards which contain only service conditions using the simplified approach, in which the expected term of an award is presumed to be the mid-point between the vesting date and the expiration date of the award, as the Company does not have sufficient historical data relating to stock-option exercises. • Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect during the period the options were granted corresponding to the expected term of the awards. • Estimated dividend yield. The estimated dividend yield is zero , as the Company does not currently intend to declare dividends in the foreseeable future. Net Loss per Share Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Options subject to early exercise that are exercised prior to vesting are excluded from the computation of weighted-average number of shares of common stock outstanding until such shares have vested. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period increased by giving effect to all potentially dilutive securities to the extent they are dilutive. Recent Accounting Pronouncements—Not Yet Adopted The Jumpstart Our Business Startups Act (JOBS Act) allows the Company, as an “emerging growth company,” to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflect this election. In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers and has modified the standard thereafter. This standard replaces existing revenue recognition rules with a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. ASU 2014-09, as amended, became effective for public companies for fiscal years beginning after December 15, 2017 and interim periods within those years. Under the JOBS Act, the Company has an additional year to adopt the standard. The Company adopted ASU 2014-09, effective February 1, 2019, using the full retrospective transition method. The adoption of the new standard is expected to have an impact on revenue and commissions expense for all periods presented. The primary impacts on revenue are an increased number of allocations of arrangement consideration between subscription and professional services and the recognition of discounts evenly across the term for multiple year subscription arrangements. Both of these impacts are primarily due to the elimination of the contingent revenue rule. The Company also expect an impact due to a change in the recognition of legacy on-premise term deals inherited during our acquisition of Leeyo Software, Inc., which will require more revenue being recognized at the beginning of the license term as opposed to evenly over the term. In addition to impacting the way that the Company recognizes revenue, the new standard will also impact the accounting for incremental commission costs of obtaining subscription contracts. Under the new standard, the Company will defer all incremental commission costs to obtain the contract. The Company expects to amortize these costs on a straight-line basis over the period of economic benefit which has been determined to be five years. In January 2016, the FASB issued ASU No. 2016-01 (Subtopic 825-10), Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities , which primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. ASU 2016-01 is effective for fiscal years beginning after December 15, 2018, and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company adopted ASU 2016-01 effective February 1, 2019 and the adoption did not have a significant impact on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , which supersedes the guidance in topic ASC 840, Leases . Under the new standard, lessees will be required to record a right-of-use assets and a lease liability for all leases, with certain exceptions, on their balance sheets. The Company expects to adopt ASU 2016-02 beginning with its fiscal year ending January 31, 2020 and interim periods thereafter. The Company is currently evaluating its lease portfolio and expects the adoption of this standard to have a material impact on its consolidated balance sheet. In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings (accumulated deficit) for stranded income tax effects resulting from the Tax Cuts and Jobs Act (the Tax Reform Act). The amendments in this ASU also require certain disclosures about stranded income tax effects. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company’s provisional adjustments recorded in the fiscal year ended January 31, 2018 to account for the impact of the Tax Reform Act did not result in stranded tax effects. The Company adopted ASU 2018-02 effective February 1, 2019, and the adoption of the standard did not have a significant impact on its consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) Improvements to Nonemployee Share-Based Payment Accounting . The guidance expands the scope of the topic to include share-based payments granted to non-employees in exchange for goods or services. Upon adoption, the fair value of awards granted to non-employees will be determined as of the grant date, which will be recognized over the service period. Previous guidance required the awards to be remeasured at fair value periodically when determining the related expense. ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early ad |
