Note 4. Revenue

We design, manufacture and service ion implantation and other processing equipment used in the fabrication of semiconductor chips and sell our products to leading semiconductor chip manufacturers worldwide. We offer a complete line of high energy, high current and medium current implanters for all application requirements. In addition, we provide extensive aftermarket lifecycle products and services, including used tools, spare parts, equipment upgrades, maintenance service and customer training. Our revenue recognition policies are set forth in Section (i) of Note 2, Summary of Significant Accounting Policies.

(a)

Alternative Operational Revenue Categories used by Management

To reflect the organization of our business operations, management reviews revenue in two categories: revenue from sales of new systems and revenue arising from the sale of used systems, parts and labor to customers who own systems, which we refer to as “aftermarket.”

Below are the revenues by categories used by management for the periods covered in this report:


	Year ended
	December 31,
	2018*		2017		2016
	(in thousands)
Systems	$	280,388	$	262,688	$	139,284
Aftermarket		162,187		147,873		127,696
	$	442,575	$	410,561	$	266,980

*The impact upon adoption of ASC 606 was an increase to systems revenue of $1.0 million twelve month period ended December 31, 2018. Please refer to Note 2 for additional discussion of ASC 606 adoption impact on revenue amounts and comparable revenue figures. The increase in revenue in the twelve month period ended December 31, 2018, in comparison to the twelve month period ended December 31, 2017, is attributable to an increase in sales of our Purion products and aftermarket business.

(b)

Economic Factors Affecting our Revenue: Geographic Breakdown of Revenue

Global economic conditions have a direct impact on our revenue. We are substantially dependent on sales of our products and services to customers outside the United States. Adverse economic conditions, political instability, potential adverse tax consequences and volatility in exchange rates pose a risk that our clients may reduce, postpone or cancel spending for our products and services, which would impact our revenue.

Revenue by geographic markets is determined based upon the location to which our products are shipped and where our services are performed. Revenue in our principal geographic markets is as follows:


	Year ended
	December 31,
	2018*		2017		2016
	(in thousands)
North America	$	54,790	$	59,825	$	49,864
Asia Pacific		326,191		296,481		166,203
Europe		61,594		54,255		50,913
	$	442,575	$	410,561	$	266,980

* The impact upon adoption of ASC 606 for the twelve months ended December 31, 2018 was primarily an increase in revenue to Asia of $1.3 million, partially offset by a decline to North America of $0.2 million. Please refer to Note 2 for additional discussion of ASC 606 adoption impact on revenue amounts and comparable revenue figures.

(c)

Recognition of Deferred Revenue from Contract Liabilities

Contract assets and contract liabilities are as follows:


	December 31,		December 31,
	2018		2017
	(in thousands)
Contract assets	$	—	$	—

Contract liabilities	$	22,584	$	18,145


	Year ended
	December 31,
	2018		2017

Revenue recognized in the period from:
Amounts included in contract liability at the beginning of the period	$	12,845	$	9,522
Performance obligations satisfied in previous periods	$	—	$	—

Contract liabilities are reflected as deferred revenue on the consolidated balance sheet. Contract liabilities relate to payments invoiced or received in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations. The increase in contract liabilities of $4.4 million from December 31, 2017 to December 31, 2018 is primarily due to the timing of system acceptances, offset by the reclassification of $1.6 million relating to our adoption of ASC 606 into retained earnings.

The majority of our system transactions have payment terms that are 90% due upon shipment of the tool and 10% due upon installation. Aftermarket transaction payment terms are such that payment is due either within 30 or 60 days of service provided or delivery of parts.

As of December 31, 2018, we had deferred revenue of $22.6 million. This represents the portion of the transaction price for contracts with customers allocated to the performance obligations that remain unsatisfied or partially unsatisfied. Short-term deferred revenue of $19.5 million represents performance obligations that will be satisfied within the next 12 months. This amount relates primarily to installation and non-standard warranty performance obligations for system sales. Long-term deferred revenue of $3.1 million relates primarily to unsatisfied extended warranty performance obligations that we expect to be satisfied within the next 24 months.