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Revenue
6 Months Ended
Dec. 31, 2018
Revenue From Contract With Customer [Abstract]  
Revenue

Note 3. Revenue

 

On July 1, 2018 the Company adopted ASC 606 electing the modified retrospective method for contracts that were still open as of July 1, 2018. Results for reporting periods after July 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with legacy accounting guidance under ASC 605.

 

The beginning net cumulative-effect adjustment to retained earnings for the adoption of ASC 606 is as follows:

 

 

 

Balance at

 

 

Adjustment Due to

 

 

Balance at

 

(Dollars in thousands)

 

July 1, 2018

 

 

ASC 606

 

 

June 30, 2018

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Account receivable, net

 

$

66,251

 

 

$

257

 

 

$

65,994

 

Deferred cost of revenue - current

 

 

677

 

 

 

(464

)

 

 

1,141

 

Prepaid expenses and other current assets

 

 

16,239

 

 

 

670

 

 

 

15,569

 

Other assets

 

 

17,416

 

 

 

5,840

 

 

 

11,576

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Other accrued liabilities

 

 

23,059

 

 

 

611

 

 

 

22,448

 

Deferred revenue - current

 

 

75,515

 

 

 

111

 

 

 

75,404

 

Long-term other liabilities

 

 

9,075

 

 

 

467

 

 

 

8,608

 

Accumulated deficit

 

 

(469,171

)

 

 

5,114

 

 

 

(474,285

)

 

 

Select unaudited condensed consolidated balance sheets line items, which reflect the adoption of ASC 606 are as follows:

 

 

 

December 31, 2018

 

(Dollars in thousands)

 

As Reported

 

 

Adjustments

 

 

Balances

Without

Adoption

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Account receivable, net

 

$

86,333

 

 

$

3,979

 

 

$

82,354

 

Deferred cost of revenue - current

 

 

273

 

 

 

(12,346

)

 

 

12,619

 

Prepaid expenses and other current assets

 

 

18,476

 

 

 

1,730

 

 

 

16,746

 

Other assets

 

 

16,528

 

 

 

6,661

 

 

 

9,867

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Other accrued liabilities

 

 

24,101

 

 

 

755

 

 

 

23,346

 

Deferred revenue - current

 

 

72,726

 

 

 

(20,278

)

 

 

93,004

 

Long-term other liabilities

 

 

10,693

 

 

 

1,123

 

 

 

9,570

 

Accumulated deficit

 

 

(482,956

)

 

 

18,424

 

 

 

(501,380

)

 

Select unaudited condensed consolidated statements of operations and comprehensive loss line items for the three and six months ended December 31, 2018, which reflect the adoption of ASC 606 are as follows:

 

 

 

Three Months Ended December 31, 2018

 

 

Six Months Ended December 31, 2018

 

(Dollars in thousands)

 

As Reported

 

 

Adjustments

 

 

Balances Without

Adoption

 

 

As Reported

 

 

Adjustments

 

 

Balances Without

Adoption

 

Net revenue

 

$

102,318

 

 

$

5,128

 

 

$

97,190

 

 

$

198,147

 

 

$

23,843

 

 

$

174,304

 

Cost of goods sold

 

 

63,938

 

 

 

1,112

 

 

 

62,826

 

 

 

121,888

 

 

 

11,706

 

 

 

110,182

 

Other expense, net

 

 

3,321

 

 

 

(171

)

 

 

3,492

 

 

 

7,304

 

 

 

(259

)

 

 

7,563

 

Research and development

 

 

13,640

 

 

 

(104

)

 

 

13,744

 

 

 

27,529

 

 

 

(136

)

 

 

27,665

 

Selling and marketing

 

 

15,139

 

 

 

(269

)

 

 

15,408

 

 

 

28,175

 

 

 

(459

)

 

 

28,634

 

General and administrative

 

 

10,469

 

 

 

(246

)

 

 

10,715

 

 

 

26,111

 

 

 

(289

)

 

 

26,400

 

Provision for income taxes

 

 

451

 

 

 

(105

)

 

 

556

 

 

 

986

 

 

 

(30

)

 

 

1,016

 

Net loss

 

 

(4,640

)

 

 

4,911

 

 

 

(9,551

)

 

 

(13,846

)

 

 

13,310

 

 

 

(27,156

)

Net loss per share - Basic and Diluted

 

$

(0.05

)

 

$

0.06

 

 

$

(0.11

)

 

$

(0.16

)

 

$

0.15

 

 

$

(0.31

)

 

 

The adoption of ASC 606 had no impact to net cash from or used in operating, investing or financing activities in the Company's unaudited condensed consolidated statements of cash flows.

 

Contract Balances

 

The timing of revenue recognition, billings, and cash collections results in trade, unbilled receivables, and deferred revenues on the unaudited condensed consolidated statement of balance sheets. The Company may offer longer or extended payments of more than one year for qualified customers in some circumstances. At times, revenue recognition occurs before the billing, resulting in an unbilled receivable, which represents a contract asset. The contract asset is a component of accounts receivable and other assets for the current and non-current portions, respectively.

 

When the Company receives advances or deposits from customers before revenue is recognized, this results in deferred revenues, which represents a contract liability. It can take up to two and half years from the time of order to revenue recognition due to the Company’s long sales cycle.  

 

Changes in the contract assets and contract liabilities are as follows:

 

 

 

December 31,

2018

 

 

July 1,

2018

 

 

Change

 

(Dollars in thousands)

 

Amount

 

 

Amount

 

 

$

 

 

%

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unbilled accounts receivable - current (1)

 

$

11,025

 

 

$

3,218

 

 

 

7,807

 

 

 

71

 

Long Term Accounts Receivable (2)

 

 

4,797

 

 

 

6,833

 

 

 

(2,036

)

 

 

(42

)

Interest receivable - non-current (2)

 

 

987

 

 

 

611

 

 

 

376

 

 

 

38

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer advances

 

 

19,900

 

 

 

22,896

 

 

 

(2,996

)

 

 

(15

)

Deferred revenue - current

 

 

72,726

 

 

 

75,515

 

 

 

(2,789

)

 

 

(4

)

Deferred revenue - non-current

 

 

23,406

 

 

 

20,976

 

 

 

2,430

 

 

 

10

 

 

 

(1)

Included in accounts receivable on consolidated balance sheets

 

(2)

Included in other assets on consolidated balance sheets

 

Changes in deferred revenue from contracts with customers are as follows:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

(Dollars in thousands)

 

December 31,

2018

 

 

December 31,

2018

 

Balance at beginning of period

 

$

95,010

 

 

$

96,491

 

New billings

 

 

103,440

 

 

 

197,788

 

Recognition of deferred revenue

 

 

(102,318

)

 

 

(198,147

)

Balance at end of period

 

$

96,132

 

 

$

96,132

 

 

Remaining Performance Obligations

 

Remaining performance obligations represent deferred revenue from open contracts for which performance has already started and the transaction price from signed contracts for which performance has not yet started. Service contracts in general are considered month-to-month contracts, and the Company has elected the practical expedients available in the guidance related to ASC 606, to not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

 

As of December 31, 2018, total remaining performance obligations amounted to $796.0 million. Of this total amount, $72.0 million related to long-term warranty and service, which is expected to be recognized over the remaining warranty period for systems that have been delivered. For systems that have been delivered but not yet installed, management estimates the timing of installation since warranty starts upon installation.

 

The following table represents the Company's remaining performance obligations related to long-term warranty and service as of December 31, 2018 and the estimated revenue expected to be recognized:

 

 

 

Fiscal years of revenue recognition

 

(Dollars in thousands)

 

2019

 

 

2020

 

 

2021

 

 

Thereafter

 

Long-term warranty and service

 

$

15,816

 

 

$

25,609

 

 

$

16,752

 

 

$

13,828

 

 

For the remaining $724.0 million of performance obligations, the Company estimates 30% to 40% will be recognized in the next 12 months, and the remaining 60% to 70% will be recognized in the 30 months thereafter. The Company’s historical experience indicates that some of its customers will cancel or renegotiate contracts as economic conditions change or when product offerings change during the long sales cycle. As such, about 15% to 20% of the Company’s contracts may never result in revenue due to cancellation.

 

The time bands reflect management’s best estimate of when the Company will transfer control to the customer and may change based on timing of shipment, readiness of customers’ facilities for installation, installation requirements, and availability of products.

 

Capitalized Contract Costs

 

The Company capitalizes and amortizes the incremental costs of obtaining a contract, primarily related to certain bonuses and sales commissions. The capitalized bonuses and sales commissions are amortized over a period of five years commencing upon the initial transfer of control of the system to the customer. The pattern of amortization is commensurate with the pattern of transfer of control of the performance obligations to the customer.

 

The opening balance of capitalized costs to obtain a contract was $5.9 million as of July 1, 2018. As of December 31, 2018, the balance of capitalized costs to obtain a contract was $7.0 million. The Company has classified the capitalized costs to obtain a contract as a component of prepaid expenses and other current assets and other assets with respect to the current and non-current portions of capitalized costs, respectively, on the consolidated balance sheets. The Company incurred a de minimum impairment loss for the periods presented. During the three and six months ended December 31, 2018, the Company recognized $0.4 million and $1.3 million, respectively, in expense related to the amortization of the capitalized contract costs.