Revenue from Contracts with Customers

On January 1, 2018, the Company adopted the new standard for revenue recognition provided in “ASU 2014-09, Revenue from Contracts with Customers” and has applied the modified retrospective transition method to all contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a transition adjustment which reduced opening retained earnings by $0.8 million as of January 1, 2018 due to the cumulative impact of adopting the new revenue standard. The Company's revenues for the three months ended March 31, 2018 included the recognition of $0.2 million of this opening adjustment as a result of adopting the new revenue standard and satisfying certain performance obligations during the period.

The Company has determined that its collaborative agreements fall within the scope of ASC 808, Collaborative Arrangements, and intends to apply the principles of ASC 606, Revenue from Contracts with Customers, in the measurement and recognition of revenue. In addition, the Company has concluded that when service contracts are sold as part of a bundled arrangement with other products and services, these contracts will no longer be accounted for under separate accounting guidance, but rather included as a separate performance obligation within a contract subject to the new standard, which includes their inclusion in the determination and allocation of the aggregate transaction price, and recognition of revenue upon the delivery of the performance obligation.

Performance obligations

Performance obligations related to instrument sales are reviewed on a contract-by-contract basis, as individual contract terms may vary, and may include installation and calibration services. For instruments sold solely to run Prosigna assays, training to the customer is a required performance obligation. Performance obligations for the Company's consumable products are generally completed upon shipment to the customer.

Disaggregated Revenues

The following table provides information about disaggregated revenue by major product line and primary geographic market (in thousands):



	Three Months Ended March 31, 2018
	Americas		Europe and Middle East		Asia Pacific		Total
Product revenue:
Instruments	$	2,686	$	1,485	$	503	$	4,674
Consumables	6,160		2,377		820		9,357
In vitro diagnostic kits	681		1,397		88		2,166
Total product revenue	9,527		5,259		1,411		16,197
Service revenue	1,261		499		88		1,848
Total product and service revenue	10,788		5,758		1,499		18,045
Collaboration revenue	5,040		—		—		5,040
Total revenues	$	15,828	$	5,758	$	1,499	$	23,085



	Three Months Ended March 31, 2017
	Americas		Europe and Middle East		Asia Pacific		Total
Product revenue:
Instruments	$	2,815	$	1,186	$	469	$	4,470
Consumables	5,596		2,114		882		8,592
In vitro diagnostic kits	481		916		42		1,439
Total product revenue	8,892		4,216		1,393		14,501
Service revenue	1,021		199		44		1,264
Total product and service revenue	9,913		4,415		1,437		15,765
Collaboration revenue	2,298		—		—		2,298
Total revenues	$	12,211	$	4,415	$	1,437	$	18,063

Contract balances and remaining performance obligations

Contract liabilities are included in the current and long-term portions of deferred revenue of $13.5 million and $12.5 million as of March 31, 2018 and December 31, 2017, respectively, and within customer deposits of $6.8 million and $8.9 million as of March 31, 2018 and December 31, 2017, respectively, on the condensed consolidated balance sheets. Contract liabilities decreased by $1.3 million during the first quarter of 2018 as the Company recognized previously deferred revenue of $7.1 million for the completion of performance obligations during the period. However, this decrease was partially offset by increases resulting from cash payments received from customers of $5.3 million and the transition adjustment of $0.8 million related to the adoption of the new revenue standard. The Company did not record any contract assets as of March 31, 2018.

Unsatisfied or partially unsatisfied performance obligations related to collaboration agreements as of March 31, 2018 were $14.2 million and are expected to be completed over the period of each collaboration agreement, through June 2020. Performance obligations related to product and service contracts as of March 31, 2018 were $6.0 million and are expected to be completed over the term of the related contract, through May 2022.

Practical expedients

The Company generally recognizes expense related to the acquisition of contracts, such as sales commissions, at the time of revenue recognition, which is generally in the same period products are sold, and in the case of services, revenue is recognized as services are rendered or over the period of time covered by the service contract, which is typically 12-months from the sale. The Company has not established any contract assets or liabilities related to contract acquisition costs as of March 31, 2018. The Company records commission expenses within selling, general and administrative expenses.

Impact of new revenue standard

In accordance with the new revenue guidance, the disclosure of the impact of adoption of this new standard to our condensed consolidated statements of income and balance sheets was as follows:



	Three months ended March 31, 2018
	Impact of changes in accounting standard
(in thousands, except per share amounts)	As Reported			Amounts under previous revenue standard			Effect of Change
Revenue:
Product and service	$	18,045		$	17,807		$	238
Collaboration	5,040			5,040			—
Total revenue	23,085			22,847			238
Net loss	$	(19,202	)	$	(19,440	)	$	238
Net loss per share - basic and diluted	$	(0.75	)	$	(0.76	)	$	0.01



	March 31, 2018
(in thousands)	As Reported			Balances under previous revenue standard			Effect of Change
Liabilities:
Deferred revenue, current portion	$	10,312		$	9,796		$	516
Stockholders' equity
Accumulated deficit	(333,058		)	(332,542		)	(516		)

The adoption of the new revenue standard did not have an aggregate impact on the Company’s net cash provided by operating activities, but resulted in offsetting changes in certain liabilities presented within net cash provided by operating activities in the Company’s condensed consolidated statement of cash flows, as reflected in the above tables.