|6 Months Ended|
Jun. 30, 2020
|Revenue Recognition [Abstract]|
NOTE 3 – REVENUE RECOGNITION
Contracts with Customers
Revenue for sales of products and services is derived from contracts with customers. The products and services promised in customer contracts include delivery of laser systems, imaging systems, and consumables as well as certain ancillary services such as training and extended warranties. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract and vary according to the arrangement. Because the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the Company’s contracts do not contain variable consideration. The Company establishes a provision for estimated warranty expense.
At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customers. In order to identify performance obligations, the Company considers all of the products or services promised in contracts regardless of whether they are explicitly stated or are implied by customary business practices.
Revenue from products and services transferred to customers at a single point in time accounted for 66% and 71% of net revenue for the three and six months ended June 30, 2020 and 81% and 82% for the three and six months ended June 30, 2019, respectively. The majority of the Company’s revenue recognized at a point in time is for the sale laser systems and consumables. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during the shipping process.
Revenue from services transferred to customers over time accounted for 34% and 29% of net revenue for the three and six months ended June 30, 2020 and 19% and 18% for the three and six months ended June 30, 2019, respectively. The majority of the Company’s revenue that is recognized over time relates to product training and extended warranties. Deferred revenue attributable to undelivered elements, which primarily consists of product training, totaled approximately $0.5 million and $0.6 million as of June 30, 2020 and December 31, 2019, respectively.
Transaction Price Allocation
The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers.
Revenue is recorded for extended warranties over time as the customer benefits from the warranty coverage. This revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. Revenue is recorded for product training as the customer attends a training program or upon the expiration of the obligation, which is generally after nine months.
The Company also has contracts that include both the product sales and product training as performance obligations. In those cases, the Company records revenue for product sales at the point in time when the product has been shipped. The customer obtains control of the product when it is shipped, as all shipments are made FOB shipping point, and after the customer selects its shipping method and pays all shipping costs and insurance. The Company has concluded that control is transferred to the customer upon shipment.
Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs. During the first quarter of 2020, the Company recorded an additional allowance for doubtful accounts of approximately $1.0 million due to the uncertainties stemming from the impact of COVID-19.
The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services and the Company has not transferred control of the goods and/or services. The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):
The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at June 30, 2020 and December 31, 2019.
The amount of revenue recognized during the six month period ended June 30, 2020 and June 30, 2019 that was included in the opening contract liability balance related to undelivered elements was $0.4 million and $0.3 million, respectively and related to extended warranty contracts was $2.0 million and $0.4 million, respectively.
Disaggregation of Revenue
The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.
The Company’s revenues related to the following geographic areas were as follows for the periods indicated (in thousands):
Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in thousands):
The Company’s sales by end market were as follows for the periods indicated (in thousands):
The Company acts as the principal in all its imaging equipment distribution sales. The Company takes possession and control of the equipment before they are sold and transferred to the customer. The Company provides the equipment and any related services directly to the customer. The Company has inventory risk before the equipment is transferred to a customer. The Company purchases and obtains the goods before obtaining a contract with a customer. The Company also has discretion in establishing the price sold to the customer for the equipment.
The revenue and percentages of revenue of the Company’s sales by product line were as follows for the periods indicated:
Shipping and Handling Costs and Revenues
Shipping and freight costs are treated as fulfillment costs. For shipments to end-customers, the customer bears the shipping and freight costs and has control of the product upon shipment. For shipments to distributors, the distributor bears the shipping and freight costs, including insurance, tariffs and other import/export costs.
The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef