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 and six months ended June 30, 2018 included the recognition of $0.2 million and $0.4 million, respectively, 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 June 30, 2018								Six Months Ended June 30, 2018
	Americas		Europe and Middle East		Asia Pacific		Total		Americas		Europe and Middle East		Asia Pacific		Total
Product revenue:
Instruments	$	3,131	$	1,555	$	802	$	5,488	$	5,817	$	3,040	$	1,305	$	10,162
Consumables	6,801		2,872		608		10,281		12,961		5,249		1,428		19,638
In vitro diagnostic kits	918		1,516		87		2,521		1,599		2,913		175		4,687
Total product revenue	10,850		5,943		1,497		18,290		20,377		11,202		2,908		34,487
Service revenue	1,540		449		105		2,094		2,801		948		193		3,942
Total product and service revenue	12,390		6,392		1,602		20,384		23,178		12,150		3,101		38,429
Collaboration revenue	4,615		—		—		4,615		9,655		—		—		9,655
Total revenues	$	17,005	$	6,392	$	1,602	$	24,999	$	32,833	$	12,150	$	3,101	$	48,084



	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
	Americas		Europe and Middle East		Asia Pacific		Total		Americas		Europe and Middle East		Asia Pacific		Total
Product revenue:
Instruments	$	3,029	$	1,653	$	1,353	$	6,035	$	5,843	$	2,840	$	1,822	$	10,505
Consumables	6,537		2,067		590		9,194		12,120		4,195		1,471		17,786
In vitro diagnostic kits	697		1,105		33		1,835		1,178		2,021		75		3,274
Total product revenue	10,263		4,825		1,976		17,064		19,141		9,056		3,368		31,565
Service revenue	796		412		38		1,246		1,830		597		83		2,510
Total product and service revenue	11,059		5,237		2,014		18,310		20,971		9,653		3,451		34,075
Collaboration revenue	16,282		—		—		16,282		18,581		—		—		18,581
Total revenues	$	27,341	$	5,237	$	2,014	$	34,592	$	39,552	$	9,653	$	3,451	$	52,656

Contract balances and remaining performance obligations

Contract liabilities are included in the current and long-term portions of deferred revenue of $13.1 million and $12.5 million as of June 30, 2018 and December 31, 2017, respectively, and within customer deposits of $9.5 million and $8.9 million as of June 30, 2018 and December 31, 2017, respectively, on the condensed consolidated balance sheets. Total contract liabilities increased by $1.2 million for the six months ended June 30, 2018 as a result of cash payments received of $11.4 million related to our collaborations and service contracts, partially offset by the recognition of previously deferred revenue of $10.4 million for the completion of certain performance obligations during the period. The Company did not record any contract assets as of June 30, 2018.

Unsatisfied or partially unsatisfied performance obligations related to collaboration agreements as of June 30, 2018 were $17.5 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 June 30, 2018 were $5.1 million and are expected to be completed over the term of the related contract, through April 2023.

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 June 30, 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 operations and balance sheets was as follows:



	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
(in thousands, except per share amounts)	As Reported			Amounts under previous revenue standard			Effect of Change		As Reported			Amounts under previous revenue standard			Effect of Change
Revenue:
Product and service	$	20,384		$	20,224		$	160	$	38,429		$	38,030		$	399
Collaboration	4,615			4,615			—		9,655			9,655			—
Total revenue	24,999			24,839			160		48,084			47,685			399
Net loss	$	(20,601	)	$	(20,761	)	$	160	$	(39,803	)	$	(40,202	)	$	399
Net loss per share - basic and diluted	$	(0.80	)	$	(0.81	)	$	0.01	$	(1.55	)	$	(1.57	)	$	0.02



	June 30, 2018
(in thousands)	As Reported			Balances under previous revenue standard			Effect of Change
Liabilities:
Deferred revenue, current portion	$	9,878		$	9,523		$	355
Stockholders' equity
Accumulated deficit	$	(353,659	)	$	(353,304	)	$	(355	)

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.