Revenue, Unearned Revenue and Remaining Performance Obligations |
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Apr. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue, Unearned Revenue and Remaining Performance Obligations | Revenue, Unearned Revenue and Remaining Performance Obligations Revenue Contract Assets A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract assets include fixed fee professional services where transfer of services has occurred in advance of the Company’s right to invoice. Contract assets are classified as accounts receivables upon invoicing. Contract assets are included in other current assets on the condensed consolidated balance sheets. Contract assets were $40 million and $43 million as of April 30, 2021 and January 29, 2021, respectively. Contract asset balances will fluctuate based upon the timing of the transfer of services, billings and customers’ acceptance of contractual milestones. Contract Liabilities Contract liabilities consist of unearned revenue, which is generally recorded when VMware has the right to invoice or payments have been received for undelivered products or services. Customer Deposits Customer deposits include prepayments from customers related to amounts received for contracts that include certain cancellation rights. Purchased credits eligible for redemption of VMware’s hosted services (“cloud credits”) are included in customer deposits until the cloud credit is consumed or is contractually committed to a specific hosted service. Cloud credits are redeemable by the customer for the gross value of the hosted offering. Upon contractual commitment for a hosted service, the net value of the cloud credits that are expected to be recognized as revenue when the obligation is fulfilled will be classified as unearned revenue. As of April 30, 2021, customer deposits related to customer prepayments and cloud credits of $283 million were included in accrued expenses and other, and $155 million were included in other liabilities on the condensed consolidated balance sheets. As of January 29, 2021, customer deposits related to customer prepayments and cloud credits of $294 million were included in accrued expenses and other, and $163 million were included in other liabilities on the condensed consolidated balance sheets. Deferred Commissions Deferred commissions are classified as current or non-current based on the duration of the expected period of benefit. Deferred commissions, including the employer portion of payroll taxes, included in other current assets as of April 30, 2021 and January 29, 2021 were $20 million and $31 million, respectively. Deferred commissions included in other assets were $1.1 billion and $1.1 billion as of April 30, 2021 and January 29, 2021, respectively. Amortization expense for deferred commissions was included in sales and marketing on the condensed consolidated statements of income and was $125 million and $100 million during the three months ended April 30, 2021 and May 1, 2020, respectively. Unearned Revenue Unearned revenue as of the periods presented consisted of the following (table in millions):
Unearned subscription and SaaS revenue is generally recognized over time as customers consume the services or ratably over the term of the subscription, commencing upon provisioning of the service. Unearned software maintenance revenue is attributable to VMware’s maintenance contracts and is generally recognized ratably over the contract duration. The weighted-average remaining contractual term as of April 30, 2021 was approximately two years. Unearned professional services revenue results primarily from prepaid professional services and is generally recognized as the services are performed. Total billings and revenue recognized during the three months ended April 30, 2021 were $1.9 billion and $2.0 billion, respectively, and did not include amounts for performance obligations that were fully satisfied upon delivery, such as on-premises licenses. Revenue recognized during the three months ended May 1, 2020 was $1.8 billion and did not include amounts for performance obligations that were fully satisfied upon delivery, such as on-premises licenses. Remaining Performance Obligations Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include unearned revenue, multi-year contracts with future installment payments and certain unfulfilled orders against accepted non-cancellable customer contracts at the end of any given period. As of April 30, 2021, the aggregate transaction price allocated to remaining performance obligations was $11.0 billion, of which approximately 56% is expected to be recognized as revenue over the next twelve months and the remainder thereafter. As of January 29, 2021, the aggregate transaction price allocated to remaining performance obligations was $11.3 billion, of which approximately 55% was expected to be recognized as revenue during fiscal 2022, and the remainder thereafter.
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