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Form 10-Q ALLSCRIPTS HEALTHCARE For: Mar 31

May 9, 2022 11:37 AM
10-Q
http://fasb.org/us-gaap/2021-01-31#AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValueApril 30, 2022falseDecember 31, 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 001-35547

 

ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

36-4392754

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

222 Merchandise Mart, Suite 2024

Chicago, IL 60654

(Address of Principal Executive Offices, Zip Code)

(800) 334-8534

(Registrant's Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on which Registered

Common Stock, par value $0.01 per share

MDRX

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 2, 2022, there were 116,019,972 shares of the registrant's $0.01 par value common stock outstanding.

 

1


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

FORM 10-Q

For the Fiscal Quarter Ended March 31, 2022

TABLE OF CONTENTS

 

 

 

 

 

PAGE

PART I. FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements (unaudited)

 

3

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

28

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

37

Item 4.

 

Controls and Procedures

 

37

PART II. OTHER INFORMATION

 

37

Item 1.

 

Legal Proceedings

 

37

Item 1A.

 

Risk Factors

 

37

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

37

Item 6.

 

Exhibits

 

38

SIGNATURES

 

39

 

 

 

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)

 

March 31, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

82,782

 

 

$

132,517

 

Restricted cash

 

 

1,305

 

 

 

1,308

 

Accounts receivable, net of allowance of $13,773 and $13,360 as of
   March 31, 2022 and December 31, 2021, respectively

 

 

170,497

 

 

 

171,622

 

Contract assets, net of allowance of $576 as of March 31, 2022 and December 31, 2021

 

 

55,162

 

 

 

63,429

 

Prepaid expenses and other current assets

 

 

56,191

 

 

 

60,511

 

Assets held for sale

 

 

1,174,747

 

 

 

1,125,111

 

Total current assets

 

 

1,540,684

 

 

 

1,554,498

 

Fixed assets, net

 

 

9,299

 

 

 

9,819

 

Software development costs, net

 

 

78,334

 

 

 

74,688

 

Intangible assets, net

 

 

158,285

 

 

 

149,690

 

Goodwill

 

 

520,187

 

 

 

506,607

 

Deferred taxes, net

 

 

6,078

 

 

 

0

 

Contract assets - long-term, net of allowance of $1,534 as of March 31, 2022 and December 31, 2021

 

 

19,198

 

 

 

28,174

 

Right-of-use assets - operating leases

 

 

16,776

 

 

 

18,324

 

Other assets

 

 

81,414

 

 

 

83,429

 

Total assets

 

$

2,430,255

 

 

$

2,425,229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Unaudited)

(In thousands, except per share amounts)

 

March 31, 2022

 

 

December 31, 2021

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

15,548

 

 

$

5,281

 

Accrued expenses

 

 

61,829

 

 

 

54,518

 

Accrued compensation and benefits

 

 

18,027

 

 

 

31,055

 

Deferred revenue

 

 

106,491

 

 

 

120,748

 

Current operating lease liabilities

 

 

5,972

 

 

 

6,133

 

Liabilities related to assets held for sale

 

 

438,988

 

 

 

380,253

 

Total current liabilities

 

 

646,855

 

 

 

597,988

 

Long-term debt

 

 

377,059

 

 

 

350,062

 

Deferred revenue

 

 

3,590

 

 

 

1,839

 

Deferred taxes, net

 

 

0

 

 

 

16,625

 

Long-term operating lease liabilities

 

 

15,241

 

 

 

16,754

 

Other liabilities

 

 

34,404

 

 

 

33,823

 

Total liabilities

 

 

1,077,149

 

 

 

1,017,091

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock: $0.01 par value, 1,000 shares authorized,
   
no shares issued and outstanding as of March 31, 2022 and December 31, 2021

 

 

0

 

 

 

0

 

Common stock: $0.01 par value, 349,000 shares authorized as of March 31, 2022
   and December 31, 2021;
277,696 and 114,792 shares issued and outstanding
   as of March 31, 2022, respectively;
276,705 and 116,114 shares issued
   and outstanding as of December 31, 2021, respectively

 

 

2,776

 

 

 

2,766

 

Treasury stock: at cost, 162,904 and 160,591 shares as of March 31, 2022 and
   December 31, 2021, respectively

 

 

(1,371,484

)

 

 

(1,321,805

)

Additional paid-in capital

 

 

1,922,026

 

 

 

1,962,386

 

Retained earnings

 

 

802,890

 

 

 

767,556

 

Accumulated other comprehensive loss

 

 

(3,102

)

 

 

(2,765

)

Total stockholders’ equity

 

 

1,353,106

 

 

 

1,408,138

 

Total liabilities and stockholders’ equity

 

$

2,430,255

 

 

$

2,425,229

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended March 31,

 

 

(In thousands, except per share amounts)

 

2022

 

 

2021

 

 

Revenue:

 

 

 

 

 

 

 

Provider

 

$

118,665

 

 

$

111,170

 

 

Payer & Life Sciences

 

 

24,007

 

 

 

22,482

 

 

Total revenue

 

 

142,672

 

 

 

133,652

 

 

Cost of revenue:

 

 

 

 

 

 

 

Provider

 

 

57,017

 

 

 

58,866

 

 

Payer & Life Sciences

 

 

12,174

 

 

 

11,869

 

 

Total cost of revenue

 

 

69,191

 

 

 

70,735

 

 

    Gross profit

 

 

73,481

 

 

 

62,917

 

 

Selling, general and administrative expenses

 

 

41,318

 

 

 

32,164

 

 

Research and development

 

 

23,420

 

 

 

20,660

 

 

Amortization of intangible and acquisition-related assets

 

 

2,171

 

 

 

2,364

 

 

Income from operations

 

 

6,572

 

 

 

7,729

 

 

Interest expense

 

 

(2,136

)

 

 

(3,143

)

 

Other income, net

 

 

12

 

 

 

798

 

 

Equity in net (loss) income of unconsolidated investments

 

 

(398

)

 

 

22

 

 

Income from continuing operations before income taxes

 

 

4,050

 

 

 

5,406

 

 

Income tax benefit (provision)

 

 

14,421

 

 

 

(1,106

)

 

Income from continuing operations, net of tax

 

 

18,471

 

 

 

4,300

 

 

(Loss) income from discontinued operations

 

 

(5,021

)

 

 

5,820

 

 

Gain on sale of discontinued operations

 

 

0

 

 

 

647

 

 

Income tax effect on discontinued operations

 

 

9,407

 

 

 

(1,710

)

 

Income from discontinued operations, net of tax

 

 

4,386

 

 

 

4,757

 

 

Net income

 

$

22,857

 

 

$

9,057

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

Continuing operations

 

$

0.16

 

 

$

0.03

 

 

Discontinued operations

 

 

0.04

 

 

 

0.03

 

 

Net income per share - Basic

 

$

0.20

 

 

$

0.06

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

Continuing operations

 

$

0.14

 

 

$

0.03

 

 

Discontinued operations

 

 

0.03

 

 

 

0.03

 

 

Net income per share - Diluted

 

$

0.17

 

 

$

0.06

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

(In thousands)

 

2022

 

 

2021

 

 

Net income

 

$

22,857

 

 

$

9,057

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(150

)

 

 

99

 

 

Change in fair value of derivatives qualifying as cash flow hedges

 

 

(251

)

 

 

(681

)

 

Other comprehensive (loss) income before income tax benefit

 

 

(401

)

 

 

(582

)

 

Income tax benefit related to items in other comprehensive income (loss)

 

 

64

 

 

 

176

 

 

Total other comprehensive income (loss)

 

 

(337

)

 

 

(406

)

 

Comprehensive income

 

$

22,520

 

 

$

8,651

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

Three Months Ended March 31,

 

(In thousands)

 

2022

 

 

2021

 

Number of common shares

 

 

 

 

 

 

Balance at beginning of period

 

 

276,705

 

 

 

274,558

 

Common stock issued under stock compensation plans,
    net of shares withheld for employee taxes

 

 

991

 

 

 

683

 

Balance at end of period

 

 

277,696

 

 

 

275,241

 

Common stock

 

 

 

 

 

 

Balance at beginning of period

 

$

2,766

 

 

$

2,745

 

Common stock issued under stock compensation plans,
    net of shares withheld for employee taxes

 

 

10

 

 

 

6

 

Balance at end of period

 

$

2,776

 

 

$

2,751

 

Number of treasury stock shares

 

 

 

 

 

 

Balance at beginning of period

 

 

(160,591

)

 

 

(134,616

)

Purchase of treasury stock

 

 

(2,313

)

 

 

0

 

Balance at end of period

 

 

(162,904

)

 

 

(134,616

)

Treasury stock

 

 

 

 

 

 

Balance at beginning of period

 

$

(1,321,805

)

 

$

(870,558

)

Purchase of treasury stock

 

 

(49,679

)

 

 

0

 

Balance at end of period

 

$

(1,371,484

)

 

$

(870,558

)

Additional paid-in capital

 

 

 

 

 

 

Balance at beginning of period

 

$

1,962,386

 

 

$

1,902,776

 

Stock-based compensation

 

 

10,822

 

 

 

8,701

 

Common stock issued under stock compensation plans,
    net of shares withheld for employee taxes

 

 

(13,301

)

 

 

(5,980

)

ASU 2020-06 implementation adjustments

 

 

(38,918

)

 

 

0

 

Warrants issued

 

 

1,037

 

 

 

1,037

 

Balance at end of period

 

$

1,922,026

 

 

$

1,906,534

 

Retained earnings

 

 

 

 

 

 

Balance at beginning of period

 

$

767,556

 

 

$

633,118

 

Net income

 

 

22,857

 

 

 

9,057

 

ASU 2020-06 implementation adjustments

 

 

12,477

 

 

 

0

 

Balance at end of period

 

$

802,890

 

 

$

642,175

 

Accumulated other comprehensive loss

 

 

 

 

 

 

Balance at beginning of period

 

$

(2,765

)

 

$

(1,838

)

Foreign currency translation adjustments, net

 

 

(150

)

 

 

99

 

Unrecognized gain (loss) on derivatives qualifying as cash flow hedges, net of tax

 

 

(187

)

 

 

(505

)

Balance at end of period

 

$

(3,102

)

 

$

(2,244

)

Total Stockholders’ Equity at beginning of period

 

$

1,408,138

 

 

$

1,666,243

 

Total Stockholders’ Equity at end of period

 

$

1,353,106

 

 

$

1,678,658

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Three Months Ended March 31,

 

(In thousands)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

22,857

 

 

$

9,057

 

Less: Income from discontinued operations

 

 

4,386

 

 

 

4,757

 

Income from continuing operations

 

 

18,471

 

 

 

4,300

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

14,101

 

 

 

16,256

 

Non-cash lease expense, net

 

 

(3,223

)

 

 

(1,760

)

Stock-based compensation expense

 

 

6,324

 

 

 

2,841

 

Deferred taxes

 

 

(17,042

)

 

 

4,657

 

Equity in net loss (income) of unconsolidated investments

 

 

398

 

 

 

(22

)

Other loss, net

 

 

226

 

 

 

716

 

Changes in operating assets and liabilities (net of businesses acquired):

 

 

 

 

 

 

Accounts receivable and contract assets, net

 

 

26,205

 

 

 

26,234

 

Prepaid expenses and other assets

 

 

5,431

 

 

 

(2,039

)

Accounts payable

 

 

10,210

 

 

 

(2,949

)

Accrued expenses

 

 

13,031

 

 

 

3,178

 

Accrued compensation and benefits

 

 

(13,291

)

 

 

(13,727

)

Deferred revenue

 

 

(28,352

)

 

 

(23,958

)

Other liabilities

 

 

2,022

 

 

 

1,443

 

Net cash provided by operating activities - continuing operations

 

 

34,511

 

 

 

15,170

 

Net cash provided by (used in) operating activities - discontinued operations

 

 

34,750

 

 

 

(10,595

)

    Net cash provided by operating activities

 

 

69,261

 

 

 

4,575

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(345

)

 

 

(225

)

Capitalized software

 

 

(9,600

)

 

 

(8,148

)

Cash paid for business acquisitions, net of cash acquired

 

 

(24,106

)

 

 

0

 

Sale of businesses and other investments, net of cash divested, and distributions received

 

 

1,083

 

 

 

1,753

 

Purchases of equity securities, other investments and related intangible assets, net

 

 

0

 

 

 

(221

)

Net cash used in investing activities - continuing operations

 

 

(32,968

)

 

 

(6,841

)

Net cash used in investing activities - discontinued operations

 

 

(11,231

)

 

 

(12,148

)

    Net cash used in investing activities

 

 

(44,199

)

 

 

(18,989

)

Cash flows from financing activities:

 

 

 

 

 

 

Taxes paid related to net share settlement of equity awards

 

 

(13,275

)

 

 

(4,723

)

Credit facility payments

 

 

(25,000

)

 

 

0

 

Credit facility borrowings, net of issuance costs

 

 

25,000

 

 

 

0

 

Repurchase of common stock

 

 

(49,679

)

 

 

0

 

Intercompany to/from parent/subsidiaries

 

 

11,685

 

 

 

28,373

 

Payment of acquisition and other financing obligations

 

 

0

 

 

 

(1,542

)

  Net cash (used in) provided by financing activities - continuing operations

 

 

(51,269

)

 

 

22,108

 

  Net cash used in financing activities - discontinued operations

 

 

(11,697

)

 

 

(29,622

)

      Net cash used in financing activities

 

 

(62,966

)

 

 

(7,514

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(11

)

 

 

(27

)

Net decrease in cash and cash equivalents

 

 

(37,915

)

 

 

(21,955

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

190,520

 

 

 

537,465

 

Cash, cash equivalents and restricted cash, end of period

 

 

152,605

 

 

 

515,510

 

Less: Cash and cash equivalents and restricted cash included in current assets held for sale

 

 

(68,518

)

 

 

(60,430

)

Cash, cash equivalents and restricted cash, end of period, excluding current assets held for sale

 

$

84,087

 

 

$

455,080

 

 

The accompanying notes are an integral part of these consolidated financial statements.

8


ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. Basis of Presentation and Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Allscripts Healthcare Solutions, Inc. (“Allscripts”) and its wholly-owned subsidiaries and controlled affiliates. All significant intercompany balances and transactions have been eliminated. Each of the terms “we,” “us,” “our” or the “Company” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.

Unaudited Interim Financial Information

The unaudited interim consolidated financial statements as of and for the three months ended March 31, 2022 and 2021 have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These interim consolidated financial statements are unaudited and, in the opinion of our management, include all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the consolidated financial statements for the periods presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The consolidated results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the SEC's rules and regulations for interim reporting. The Company believes that the disclosures made are adequate to make these unaudited interim consolidated financial statements not misleading. They should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “Form 10-K”).

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Our estimates and assumptions consider the economic implications of COVID-19 on our critical and significant accounting estimates. Actual results could differ materially from these estimates.

Significant Accounting Policies

There have been no changes to our significant accounting policies from those disclosed in our Form 10-K.

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exceptions and also requires the application of the if-converted method for calculating diluted earnings per share, whereas the treasury stock method is no longer permitted for convertible instruments. The standard is effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years and interim periods within those fiscal years, beginning after December 15, 2021. We adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method of transition, which resulted in an increase in long-term debt of $26.4 million, a decrease in additional paid-in capital of $38.9 million and an increase to retained earnings of $12.5 million, as of January 1, 2022. Refer to Note 10, “Debt” for additional information.

Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued Accounting Standards Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers(“ASU 2021-08”), which requires contract assets and contract liabilities (deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers”, as if it had originated the contracts. The new guidance creates an exception to the general recognition and measurement principles of ASC 805, “Business Combinations”. The new standard should be applied prospectively and is effective for all public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The standard is effective for all other entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effects of the adoption of ASU 2021-08 on our consolidated financial statements.

9


We do not believe that any other recently issued, but not yet effective accounting standards, if adopted, will have a material impact on our consolidated financial statements.

2. Revenue from Contracts with Customers

Our two primary revenue streams are (i) software delivery, support and maintenance and (ii) client services. Software delivery, support and maintenance revenue consists of all of our proprietary software sales (either under a perpetual or term license delivery model), subscription-based software sales, transaction-related revenue, the resale of hardware and third-party software and revenue from post-contract client support and maintenance services, which include telephone support services, maintaining and upgrading software and ongoing enhanced maintenance. Client services revenue consists of revenue from managed services solutions, such as private cloud hosting, outsourcing and revenue cycle management, as well as other client services and project-based revenue from implementation, training and consulting services. For some clients, we host the software applications licensed from us using our own or third-party servers. For other clients, we offer an outsourced service in which we assume partial to total responsibility for a healthcare organization’s IT operations using our employees.

At March 31, 2022 and December 31, 2021, we had capitalized costs to obtain or fulfill a contract of $8.3 million and $8.1 million, respectively, in Prepaid and other current assets and $10.9 million and $11.9 million, respectively, in Other assets. During the three months ended March 31, 2022 and 2021, we recognized $2.9 million and $3.3 million, respectively, of amortization expense related to such capitalized costs. The amortization of these capitalized costs to obtain a contract are included in Selling, general and administrative expense within our consolidated statements of operations.

The timing of revenue recognition, billings and cash collections results in billed and unbilled accounts receivable, contract assets and customer advances and deposits. Accounts receivable, net includes both billed and unbilled amounts where the right to receive payment is unconditional and only subject to the passage of time. Contract assets include amounts where revenue recognized exceeds the amount billed to the customer and the right to payment is not solely subject to the passage of time. Deferred revenue includes advanced payments and billings in excess of revenue recognized. Our contract assets and deferred revenue are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or long-term based on the timing of when we expect to complete the related performance obligations and bill the customer. Deferred revenue is classified as current or long-term based on the timing of when we expect to recognize revenue.

The breakdown of revenue recognized based on the origination of performance obligations and elected accounting expedients is presented in the tables below:

(In thousands)

 

Three Months
Ended
March 31, 2022

 

Revenue related to deferred revenue balance at beginning of period

 

$

36,151

 

Revenue related to new performance obligations satisfied during the period

 

 

45,306

 

Revenue recognized under "right-to-invoice" expedient

 

 

61,114

 

Reimbursed travel expenses, shipping and other revenue

 

 

101

 

Total revenue

 

$

142,672

 

 

(In thousands)

 

Three Months
Ended
March 31, 2021

 

Revenue related to deferred revenue balance at beginning of period

 

$

29,401

 

Revenue related to new performance obligations satisfied during the period

 

 

47,263

 

Revenue recognized under "right-to-invoice" expedient

 

 

56,811

 

Reimbursed travel expenses, shipping and other revenue

 

 

177

 

Total revenue

 

$

133,652

 

 

The aggregate amount of contract transaction price related to remaining unsatisfied performance obligations represents contracted revenue that has not yet been recognized and includes both deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Total unsatisfied performance obligations equaled $1.0 billion as of March 31, 2022, of which we expect to recognize approximately 38% over the next 12 months, and the remaining 62% thereafter.

10


Revenue Recognition

We recognize revenue only when we satisfy an identified performance obligation (or bundle of obligations) by transferring control of a promised product or service to a customer. We consider a product or service to be transferred when a customer obtains control because a customer has sole possession of the right to use (or the right to direct the use of) the product or service for the remainder of its economic life or to consume the product or service in its own operations. We evaluate the transfer of control primarily from the customer’s perspective as this reduces the risk that revenue is recognized for activities that do not transfer control to the customer.

The majority of our revenue is recognized over time because a customer continuously and simultaneously receives and consumes the benefits of our performance. The exceptions to this pattern are our sales of perpetual and term software licenses, and hardware, where we determined that a customer obtains control of the asset upon granting of access, delivery or shipment.

We disaggregate our revenue from contracts with customers based on the type of revenue and nature of revenue stream, as we believe those categories best depict how the nature, amount and uncertainty of our revenue and cash flows are affected by economic factors. The tables below summarize revenue by type and nature of revenue stream as well as by our reportable segments. Refer to Note 16, “Business Segments”, for further information regarding the change to our reportable segments during the first quarter of 2022.

 

 

Three Months Ended March 31, 2022