Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. CALLIDUS SOFTWARE INC (1035748) 10-Q published on Nov 09, 2017 at 4:08 pm
Reporting Period: Sep 29, 2017
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230), 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 unaudited condensed consolidated statement of cash flows. The inclusion of restricted cash will increase the beginning and ending balances of the unaudited condensed consolidated statement of cash flows by $1.4 million.
The Company is on schedule in establishing new accounting policies, implementing systems and processes, and internal controls necessary to support the requirements of the new standard by the effective date. The Company has completed its preliminary assessment of the financial statement impact of Topic 606, as discussed below, and will continue to update that assessment as more information becomes available. Topic 606 will accelerate the recognition of revenue for term software licenses and, in some cases, where so-called contingent revenue (i.e., amounts allocated to delivered items are limited to amounts that are not contingent on the provision of future services) exists.
Also, included in the Company’s assessment of Topic 606 is the potential impact relating to the deferral of incremental commission costs of obtaining subscription contracts. Under current accounting guidance, the Company defers only direct and incremental commission costs to obtain a contract and amortized those costs over the corresponding term of the contract. Under Topic 606, the Company will defer all direct and incremental commission costs to obtain the contract. The Company will amortize these costs on a straight-line basis over the estimated period of benefit or the related contractual renewal period, depending on whether the contract is an initial or renewal contract, respectively.
The two permitted transition methods under the new standard are the full retrospective method, under which Topic 606 would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, under which the cumulative effect of applying Topic 606 would be recognized at the date of initial application. The Company currently intends to elect the modified retrospective transition approach. The Company is currently determining the financial statement impact and its disclosure requirements of Topic 606.
Recurring Revenue Gross Profit. The increase in recurring revenue gross profit for the three months ended September 30, 2017, compared to the same period in 2016, reflects increased SaaS revenue of $12.0 million due to net new bookings growth. This increase was partially offset by a decrease of $2.3 million in maintenance revenue, and a $1.8 million increase in depreciation and maintenance, equipment and other related expenses, as a result of our investment in data center costs and a $1.1 million increase in personnel related costs. The increase in recurring revenue gross profit for the nine months ended September 30, 2017, compared to the same period in 2016, reflects increased SaaS revenue of $34.2 million. This increase was partially offset by a decrease of $6.6 million in maintenance revenue due to the conversion of existing customers to our cloud-based commissions product, a $5.7 million increase in depreciation, maintenance, equipment and other related expenses because we invested in state of the art data centers and a $3.7 million increase in personnel related costs.
We believe SaaS billings and normalized SaaS billings are useful information to investors and others as a leading indicator in understanding and evaluating operating results. We believe that normalized SaaS billings provide valuable insight into the sales of our solutions and the performance of our business. We do not consider normalized SaaS billings as a substitute for revenue recognition or revenue measurement. We define SaaS billings, normalized SaaS billings and trailing twelve months as follows: