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. 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. 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 year ended December 31, 2018.

Disaggregation of Revenue

The Company’s primary categories of revenue are Healthcare, Commuter, COBRA and Other revenue and are disclosed in the 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):



	Year ended December 31,
(in thousands)	2018		2017
Benefit Administration Service and COBRA	$	401,340	$	407,476
Interchange	50,907		50,229
Other revenue	19,937		18,390
Total	$	472,184	$	476,095

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 December 31, 2018 and December 31, 2017 was $3.9 million and $3.4 million, 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 $8.8 million and $9.3 million as of December 31, 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 $2.9 million for the year ended December 31, 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 year ended December 31, 2018, the Company recognized the following revenues (in thousands):



Revenue recognized in the period for:	Year Ended December 31, 2018
Amounts included in contract liabilities at the beginning of the period:
Performance obligations satisfied	$	571
Changes in the period:
Changes in the estimated transaction price allocated to performance obligations satisfied in prior periods	(1,100		)
Performance obligations satisfied from new activities in the period - contract revenue	472,713
Total revenue	$	472,184

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 December 31, 2018 (in thousands):



	As of December 31, 2018
2019	$	571
2020	571
2021	571
2022 and thereafter	1,143
Total	$	2,856

Impact on Financial Statements

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



	Year Ended December 31, 2018
	As reported			Adjustments			Balance without adoption of ASC 606
Operating expenses:
Sales and marketing	$	73,092		$	(543	)	$	72,549
Total operating expenses	427,800			(543		)	427,257

Income from operations	44,384			543			44,927
Income before income taxes	40,115			543			40,658
Income tax provision	(14,145		)	(190		)	(14,335		)
Net income	25,970			353			26,323

Net income per share:
Basic	$	0.65		$	0.01		$	0.66
Diluted	$	0.64		$	0.01		$	0.65



	December 31, 2018
	As reported		Adjustments			Balance without adoption of ASC 606
Assets
Other assets	$	33,324	$	(8,776	)	$	24,548
Total assets	1,785,153		(8,776		)	1,776,377
Deferred tax assets, net	1,482		2,198			3,680

Liabilities and Stockholders’ Equity						—
Retained earnings	105,642		6,578			99,064
Total stockholders’ equity	$	665,141	$	6,578		$	658,563