Revenue

On January 1, 2018, we adopted ASC 606, applying the modified retrospective method to all contracts that were not completed as of that date. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period results are not adjusted and continue to be reported in accordance with Topic 605, Revenue Recognition. See the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for our accounting policies applied to revenue recognition prior to adoption of ASC 606. We generally invoice our customers at the beginning of the term on a monthly basis with a term of net 30-60 days. We applied the practical expedient provided by ASC 606 and did not evaluate contracts of one year or less for the existence of a significant financing component. Our policy is to exclude sales and other indirect taxes when measuring the transaction price of its subscription agreements. The primary impact of adopting ASC 606 relates to the deferral of incremental costs of obtaining customer contracts and the amortization of those costs over the period of benefit. We recorded an increase in total assets of $9.3 million and an increase in retained earnings of $6.9 million (net of tax effect) as of January 1, 2018. The tax impact resulted in an increase in deferred tax liabilities in the amount of $2.4 million with an offset to retained earnings upon adoption. The adoption of the preceding standard did not have a material impact on the Company's revenue for the three and nine months ended September 30, 2018.

Disaggregation of Revenue

The Company's primary categories of revenue are Healthcare, Commuter, COBRA and Other revenue and are disclosed in the condensed consolidated statements of income. The following table provides information about disaggregated revenue from contracts with customers by the nature of the products and services (in thousands):



	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2018		2017		2018		2017
Benefit Administration Service and COBRA	$	95,212	$	99,482	$	295,911	$	305,405
Interchange	11,161		10,972		40,461		39,924
Other revenue	7,598		4,392		20,748		12,686
Total	$	113,971	$	114,846	$	357,120	$	358,015

Contract Balances

We generally do not recognize revenue in advance of invoicing our customers, however, we record a receivable when revenue is recognized prior to payment and we have unconditional right to payment. Alternatively, when payment precedes the related services, we record a contract liability, or deferred revenue, until our performance obligations are satisfied. Our deferred revenue as of September 30, 2018 and December 31, 2017 was $8.3 million and $3.4 million, net of $1.0 million of contract assets, respectively. The balances related to cash received in advance for a certain interchange revenue arrangement, other up-front fees and other commuter deferred revenue. The Company expects to satisfy its remaining obligations for these arrangements.

Contract Costs

Contract costs relate to incremental costs of obtaining a contract with a customer. Contract costs, which primarily consist of deferred sales commissions, were $9.5 million and $9.3 million as of September 30, 2018 and January 1, 2018, respectively and are included in other assets on the condensed consolidated balance sheets. Amortization expense for the deferred costs was $0.7 million and $2.2 million for the three and nine months ended September 30, 2018. There was no impairment loss in relation to the costs capitalized for the periods presented. Deferred contract costs are amortized on a straight-line basis over the period of benefit, which is consistent with the pattern of transfer of the good or service to which the asset relates.

Performance Obligations

During the three and nine months ended September 30, 2018, the Company recognized revenue of ($0.1) million and ($0.4) million subject to changes in the estimated transaction price allocated to performance obligations satisfied in prior periods.

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period, in thousands. The Company applies the practical expedient to not disclose information about contracts with original expected durations of one year or less, amounts of variable consideration attributable to the variable consideration allocation exception, or contract renewals that are unexercised as of September 30, 2018 (in thousands):



2018		2019	2020	2021 and thereafter	Total
$	142	571	571	1,716	$	3,000

Impacts on Financial Statements

In accordance with ASC 606, the disclosure of the impact of adoption to our unaudited condensed consolidated statements of income and balance sheets was as follows (in thousands, except per share amounts):



	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
	As reported			Adjustments			Balance without adoption of ASC 606			As reported			Adjustments		Balance without adoption of ASC 606
Operating expenses:
Sales and marketing	$	17,920		$	(69	)	$	17,851		$	54,779		225		$	55,004

Total operating expenses	105,842			(69		)	105,773			317,694			225		317,919

Income from operations	8,129			69			8,198			39,426			(225	)	39,201

Income before income taxes	7,058			69			7,127			36,474			(225	)	36,249

Income tax provision	(4,934		)	(48		)	(4,982		)	(12,407		)	76		(12,331		)

Net income	2,124			21			2,145			24,067			(149	)	23,918

Net income per share:
Basic	$	0.05					$	0.05		$	0.60				$	0.60
Diluted	$	0.05					$	0.05		$	0.59				$	0.59



	September 30, 2018
	As reported		Adjustments			Balance without adoption of ASC 606
Assets
Other assets	$	35,074	$	(7,104	)	$	27,970
Total assets	1,678,587		(7,104		)	1,671,483

Liabilities and Stockholders' Equity
Retained earnings	103,764		(7,104		)	96,660
Total stockholders' equity	$	659,896	$	(7,104	)	$	652,792