Topic 606 Adoption Impact and Revenue from Contracts with Customers | TOPIC 606 ADOPTION IMPACT AND REVENUE FROM CONTRACTS WITH CUSTOMERS: On April 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of April 1, 2018. Results for reporting periods beginning after April 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic reporting under Topic 605. Under Topic 606, revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The Company determines 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, the Company satisfies a performance obligation We recorded a net increase to our opening retained earnings of $12.7 million, net of tax, due to the cumulative impact of adopting Topic 606, with the impact primarily related to the capitalization of costs of obtaining customer contracts. The details of the significant changes and quantitative impact of the changes are disclosed below. Costs of Obtaining Customer Contracts The Company previously recognized commission payments made for obtaining a contract as an operating expense when incurred. Under Topic 606, the Company capitalizes incremental costs to acquire contracts and amortizes them over the expected period of benefit, which we have determined to be four years. As of September 30, 2018, the remaining unamortized contract costs were $8.5 million and are included in deferred commissions, net, in the condensed consolidated balance sheet. Net capitalized costs of $2.0 million were recorded as a reduction to operating expense for the six months ended September 30, 2018. No impairment was recognized for the six months ended September 30, 2018. Impacts on Financial Statements Condensed Consolidated Balance Sheet Impact of changes in accounting policies As reported September 30, 2018 Adjustments Balances without adoption of Topic 606 Deferred commissions, net 8,490 (8,490) — Others 1,179,302 — 1,179,302 Total assets $ 1,187,792 $ (8,490) $ 1,179,302 Deferred income taxes 15,952 (2,281) 13,671 Others 411,162 — 411,162 Total liabilities 427,114 (2,281) 424,833 Retained earnings 658,666 (6,209) 652,457 Other equity 102,012 — 102,012 Total equity 760,678 (6,209) 754,469 Total liabilities and equity $ 1,187,792 $ (8,490) $ 1,179,302 Condensed Consolidated Statement of Operations Impact of changes in accounting policies As reported for the six months ended September 30, 2018 Adjustments Balances without adoption of Topic 606 Revenues $ 127,283 $ — $ 127,283 Cost of revenue 48,120 — 48,120 Gross profit $ 79,163 $ — $ 79,163 Operating expenses: Sales and marketing $ 69,263 $ 2,047 $ 71,310 Other operating expenses 77,701 — 77,701 Total operating expenses 146,964 2,047 149,011 Loss from operations (67,801) (2,047) (69,848) Total other income 75 — 75 Loss from continuing operations before income taxes (67,726) (2,047) (69,773) Income taxes (benefit) 1,272 (487) 785 Net loss from continuing operations $ (68,998) $ (1,560) $ (70,558) Condensed Consolidated Statement of Comprehensive Income Impact of changes in accounting policies As reported for the six months ended September 30, 2018 Adjustments Balances without adoption of Topic 606 Net earnings $ 17,608 $ (1,560) $ 16,048 Other comprehensive loss: Change in foreign currency translation adjustment (575) — (575) Comprehensive income $ 17,033 $ (1,560) $ 15,473 Condensed Consolidated Statement of Cash Flows Impact of changes in accounting policies As reported for the six months ended September 30, 2018 Adjustments Balances without adoption of Topic 606 Net earnings $ 17,608 $ (1,560) $ 16,048 Earnings from discontinued operations (86,606) — (86,606) Adjustments for: Deferred income taxes 12,444 (487) 11,957 Others 53,111 — 53,111 Changes in: Accounts receivable, net (2,649) — (2,649) Deferred commissions (2,047) 2,047 — Other assets (12,480) — (12,480) Accounts payable and other liabilities (7,276) — (7,276) Deferred revenue (1,515) — (1,515) Net cash from operating activities (29,410) — (29,410) Net cash from investing activities (5,857) — (5,857) Net cash from financing activities (55,862) — (55,862) Net cash from discontinued operations 39,642 — 39,642 Effect of exchange rate changes on cash (1,484) — (1,484) Net change in cash and cash equivalents (52,971) — (52,971) Cash and cash equivalents at beginning of period 140,018 — 140,018 Cash and cash equivalents at end of period $ 87,047 $ — $ 87,047 Disaggregation of Revenue In the following table, revenue is disaggregated by primary geographical market and major service offerings (dollars in thousands). For the six months ended September 30, Primary Geographical Markets 2018 2017 United States $ 116,195 $ 91,271 Europe 8,710 7,830 APAC 2,378 1,669 $ 127,283 $ 100,770 Major Offerings/Services Subscription 106,190 79,369 Marketplace and Other 21,093 21,401 $ 127,283 $ 100,770 Transaction Price Allocated to the Remaining Performance Obligations We have performance obligations associated with fixed commitments in customer contracts for future services that have not yet been recognized in our condensed consolidated financial statements. The amount of fixed revenue not yet recognized was $168.0 million as of September 30, 2018. The Company expects to recognize revenue on substantially all of these remaining performance obligations by March 31, 2021 with the balance recognized thereafter. |