Revenue Recognition

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605 Revenue Recognition. The following summarizes the significant changes in accounting treatment due to the adoption of the new revenue standard:


•	We recorded a net increase to opening retained earnings of $0.5 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to our capitalization of certain setup costs, inclusive of income tax effects. The details of the significant changes and quantitative impact of the changes for the three months ended March 31, 2018 are disclosed below.


•	The Company previously recognized setup costs related to new customers as selling, general and administrative expense when they were incurred. Under ASC 606, the Company capitalizes certain setup costs as costs to fulfill a contract and amortizes them consistently with the pattern of transfer of the good or service to which the asset relates.


•	The following tables summarize the impacts of ASC 606 adoption on the Company’s consolidated financial statements for the quarter ended March 31, 2018 (in thousands, except per share data).



	As Reported March 31, 2018		Adjustments			As Adjusted Without Adoption of ASC 606
Condensed consolidated balance sheet
Assets:
Other non-current assets	$	2,139	$	(623	)	$	1,516
Liabilities:
Deferred income taxes	12,208		167			12,375
Stockholders' equity:
Retained earnings	123,393		(456		)	122,937



	As Reported Three Months Ended March 31, 2018			Adjustments			As Adjusted Without Adoption of ASC 606
Condensed consolidated statement of operations
Operating expenses:
Selling, general and administrative expenses	$	61,167		$	(26	)	$	61,141
Income from operations	1,241			26			1,267
Loss before income taxes	(1,111		)	26			(1,085		)
Income tax expense	573			6			579
Net loss	(1,684		)	20			(1,664		)
Basic loss per share	$	(0.03	)	$	—		$	(0.03	)
Diluted loss per share	$	(0.03	)	$	—		$	(0.03	)

The adoption of ASC 606 had no impact on the Company’s cash flow from operations and resulted in offsetting shifts in cash flows throughout net (loss) income and various changes in working capital balances.

Nature of Goods and Services

The Company primarily generates revenues from the procurement of marketing materials for customers. Service revenue including creative, design, installation, warehousing and other services has not been material to the Company’s overall revenue to date.

Products and services may be sold separately or in bundled packages. For bundled packages, the Company accounts for individual products and services separately if they are distinct - that is, if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer.

We include any fixed charges per our contracts as part of the total transaction price. The transaction price is allocated between separate products and services in a bundle based on their standalone selling prices. The standalone selling prices are generally determined based on the prices at which the Company separately sells the products and services.

Contracts may include variable consideration (for example, customer incentives like rebates), and to the extent that variable consideration is not constrained, we include the expected amount within the total transaction price and update our assumptions over the duration of the contract. The constraint will generally not result in a reduction in the estimated transaction price.

The Company’s performance obligations related to the procurement of marketing materials are typically satisfied upon shipment or delivery of our products to customers. Payment is typically due from the customer at this time or shortly thereafter. Unbilled revenue represents shipments or deliveries that have been made to customers for which the related account receivable has not yet been invoiced. The Company does not have material future performance obligations that extend beyond one year.

Some service revenue may be recognized over time but the difference from recognizing that revenue over time versus at a point in time when the service is completed and accepted by the customer has not been material to the Company’s overall revenue to date.

Disaggregation of Revenue

The following table is a summary of revenue disaggregated by primary geographical market, which also includes a reconciliation of the disaggregated revenue with the reportable segments, for the three months ended March 31, 2018 (in thousands).



	Reportable Segments
Geographical Market	North America		International		Total
United States and Canada	$	189,277	$	—	$	189,277
Europe and Asia	—		64,914		64,914
Latin America	—		20,348		20,348
Total	$	189,277	$	85,262	$	274,539

Contract Balances

Contract liabilities were $31.5 million and $17.6 million as of March 31, 2018 and January 1, 2018, respectively, and are referred to as deferred revenue in the condensed consolidated financial statements. We record deferred revenue when cash payments are received or due in advance of our performance. The increase in the deferred revenue balance for the three months ended March 31, 2018 is primarily driven by cash payments received or due in advance of satisfying our performance obligations as well as the recognition of a contract liability for projects where we have a right to payment (approximately $6.5 million), offset by $8.7 million of revenue recognized from the deferred revenue balance as of January 1, 2018. There were no contract assets during the period.

Transaction Price Allocated to Remaining Performance Obligations

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of March 31, 2018. The Company does not have material future performance obligations that extend beyond one year. Accordingly, the Company has applied the optional exemption for contracts that have an original expected duration of one year or less. The nature of the remaining performance obligations as well as the nature of the variability and how it will be resolved is described above.

Costs to Obtain a Customer Contract

The Company incurs certain incremental costs to obtain a contract that the Company expects to recover. The Company applies a practical expedient and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. No incremental costs to obtain a contract incurred by the Company prior to adoption of ASC 606 or during the quarter ended March 31, 2018, are required to be capitalized. These costs primarily relate to commissions paid to our account executives and are included in selling, general and administrative expenses.

Costs to Fulfill a Customer Contract

The Company capitalized certain setup costs related to new customers as fulfillment costs upon adoption of ASU 2014-09 and during the quarter ended March 31, 2018. The closing balance at March 31, 2018 was $0.6 million. Capitalized contract costs are amortized over the expected period of benefit using the straight-line method which is generally three years. In the quarter ended March 31, 2018, the amount of amortization was $0.1 million, and there was no impairment loss in relation to the costs capitalized.