Revenue
The Company's revenue is derived principally from contracts which promise to deliver combinations of software licensing and related maintenance and services, which are accounted for as separate performance obligations with differing revenue recognition patterns. The transaction price is allocated to each distinct performance obligation based on the relative standalone selling price. Software license revenue consists of the Company’s software sold under a software license and is generally recognized upon shipment and delivery of license keys. Maintenance and service revenue consists of both maintenance revenues, which is recognized ratably over the term of the arrangement, and professional services revenues which is recognized based on when the Company delivers the related service pursuant to the terms of the arrangement.
Customer contracts
The Company accounts for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights and payment terms can be identified, the contract has commercial substance, and it is probable the Company will collect substantially all of the consideration it is entitled to. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised software or providing service to a customer.
For multi-year software licenses, the Company generally invoices customers annually at the beginning of each annual coverage period.
The contract balances of the Company’s accounts receivable and contract assets, net of allowance for expected credit losses, and deferred revenue as of December 31, 2024, December 31, 2023 and January 1, 2023 were as follows:
| | | | | | | | | | | | | | | | | |
| Contract Balances |
| December 31, 2024 | | December 31, 2023 | | January 1, 2023 |
| (in thousands) |
| Accounts receivable, net | $ | 9,211 | | | $ | 4,006 | | | $ | 5,998 | |
| Contract assets, net | $ | 24,543 | | | $ | 14,999 | | | $ | 10,536 | |
| Deferred revenue | $ | 11,090 | | | $ | 12,953 | | | $ | 11,553 | |
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Transaction Price Allocated to the Remaining Performance Obligations
As of December 31, 2024, approximately $34.3 million of revenue is expected to be recognized from remaining performance obligations. This figure represents contracted revenue that has not yet been recognized, which includes both deferred revenue and backlog, net of cancellations and adjustments. The Company's backlog represents installment billings for periods beyond the current billing cycle. The Company expects to recognize revenue on approximately 46% of these remaining performance obligations over the next 12 months, with the remaining balance recognized thereafter.
Deferred Revenue
Deferred revenue is comprised mainly of unearned revenue related to PCS on software licenses and pending software license deliveries. Deferred revenue also includes contracts for professional services to be performed in the future.
During the years ended December 31, 2024 and 2023, the Company recognized revenue of $6.7 million and $7.2 million, respectively, that was included in the deferred revenue balance at the beginning of fiscal year 2024 and 2023, respectively. All other activity in deferred revenue is due to the timing of invoices in relation to the timing of revenue recognized during the years ended December 31, 2024 and 2023 as described above. Approximately 68% of the Company's deferred revenue as of December 31, 2024 is expected to be recognized over the next 12 months with the remainder recognized thereafter.