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42
2014 Compared to 2013
Audio products and solutions revenues decreased $7.2 million, or 4.7%, for 2014, compared to 2013. The decrease in audio
revenues was primarily the result of the previously discussed lower amortization of deferred revenues attributable to transactions
executed on or before December 31, 2010.
Services Revenues
2015 Compared to 2014
Services revenues are derived primarily from maintenance contracts, as well as professional services and training. The $17.6
million, or 11.6%, increase in services revenues for 2015, compared to 2014, was primarily the result of the determination that
Implied Maintenance Release PCS on Media Composer 8.0 no longer exists, resulting in accelerated recognition of maintenance
revenues that were previously being recognized over the expected period of Implied Maintenance Release PCS rather than the
contractual maintenance period. The increased revenues in 2015 reflected the recognition of orders received after the release of
Media Composer 8.0 that would have qualified for earlier recognition under GAAP.
2014 Compared to 2013
The $16.3 million, or 9.7%, decrease in services revenues for 2014, compared to 2013, was primarily the result of the previously
discussed lower amortization of deferred revenues attributable to transactions executed on or before December 31, 2010.
Revenue Backlog
At December 31, 2015, we had revenue backlog of approximately $552 million, compared to $540 million at December 31, 2014.
Revenue backlog, as we define it, consists of firm orders received and includes both (i) orders where the customer has paid in
advance of our performance obligations being fulfilled, which are reflected as deferred revenues in our balance sheet and (ii)
orders for future product deliveries or services that have not yet been invoiced by us. Revenue backlog associated with
arrangement consideration paid in advance primarily consists of deferred revenue related to (i) the undelivered portion of annual
support contracts, (ii) software arrangements for which VSOE of fair value of undelivered elements does not exist, (iii) Implied
Maintenance Release PCS performance obligations, and (iv) in-process installations that are subject to substantive customer
acceptance provisions. Revenue backlog associated with orders for future product deliveries and services where cash has not
been received primarily consists of (i) product orders received but not yet shipped, (ii) professional services not yet rendered and
(iii) future years of multi-year support agreements not yet billed.
A meaningful, albeit rapidly declining portion of our revenue backlog is attributable to deferred revenue related to transactions
that occurred prior to our January 1, 2011 adoption of the accounting guidance related to multiple-element arrangements (ASU
No. 2009-13) and the accounting guidance related to differentiating software and hardware in a combined product offering (ASU
No. 2009-14). Prior to our adoption of ASU No. 2009-14, the majority of our products were subject to software revenue
recognition guidance that required us to recognize revenue ratably for periods as long as eight years from product delivery
because we did not have VSOE of fair value for the Implied Maintenance Release PCS deliverable included in most of our
customer arrangements. Upon adoption of ASU No. 2009-14, most of our products are now excluded from the scope of software
revenue recognition, resulting in recognition of arrangement consideration upon product shipments (based on management’s best
estimate of selling price) with only the arrangement consideration attributable to Implied Maintenance Release PCS being
recognized ratably over an extended period of time. As a result of the change in accounting standards, even with consistent or
increasing aggregate order values, we will experience significant declines in revenues, deferred revenues and revenue backlog in
the coming year as revenue backlog associated with transactions occurring prior to January 1, 2011 decreases each quarter without
being replaced by comparable revenue backlog from new transactions.