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 nine months ended September 30, 2018 included the recognition of $0.2 million and $0.6 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 prior to any revenue recognition related to the instrument sale. 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 September 30, 2018								Nine Months Ended September 30, 2018
	Americas		Europe and Middle East		Asia Pacific		Total		Americas		Europe and Middle East		Asia Pacific		Total
Product revenue:
Instruments	$	3,696	$	1,149	$	584	$	5,429	$	9,512	$	4,189	$	1,890	$	15,591
Consumables	7,808		2,633		699		11,140		20,770		7,882		2,126		30,778
In vitro diagnostic kits	783		1,687		77		2,547		2,382		4,600		252		7,234
Total product revenue	12,287		5,469		1,360		19,116		32,664		16,671		4,268		53,603
Service revenue	1,582		641		114		2,337		4,383		1,589		307		6,279
Total product and service revenue	13,869		6,110		1,474		21,453		37,047		18,260		4,575		59,882
Collaboration revenue	7,163		—		—		7,163		16,818		—		—		16,818
Total revenues	$	21,032	$	6,110	$	1,474	$	28,616	$	53,865	$	18,260	$	4,575	$	76,700



	Three Months Ended September 30, 2017								Nine Months Ended September 30, 2017
	Americas		Europe and Middle East		Asia Pacific		Total		Americas		Europe and Middle East		Asia Pacific		Total
Product revenue:
Instruments	$	1,760	$	1,392	$	1,292	$	4,444	$	7,603	$	4,231	$	3,115	$	14,949
Consumables	6,146		2,283		591		9,020		18,265		6,481		2,060		26,806
In vitro diagnostic kits	705		869		115		1,689		1,883		2,890		190		4,963
Total product revenue	8,611		4,544		1,998		15,153		27,751		13,602		5,365		46,718
Service revenue	1,348		367		47		1,762		3,179		962		131		4,272
Total product and service revenue	9,959		4,911		2,045		16,915		30,930		14,564		5,496		50,990
Collaboration revenue	10,101		—		—		10,101		28,682		—		—		28,682
Total revenues	$	20,060	$	4,911	$	2,045	$	27,016	$	59,612	$	14,564	$	5,496	$	79,672

Contract balances and remaining performance obligations

Contract liabilities are included in the current and long-term portions of deferred revenue of $12.5 million as of both periods ending September 30, 2018 and December 31, 2017, and within customer deposits of $10.2 million and $8.9 million as of September 30, 2018 and December 31, 2017, respectively, on the condensed consolidated balance sheets. Total contract liabilities increased by $1.2 million for the nine months ended September 30, 2018 as a result of cash payments received of $23.5 million related to our collaborations and service contracts, partially offset by the recognition of previously deferred revenue of $22.5 million for the completion of certain performance obligations during the period. The Company did not record any contract assets as of September 30, 2018.

Unsatisfied or partially unsatisfied performance obligations related to collaboration agreements as of September 30, 2018 were $16.7 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 September 30, 2018 were $6.0 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 September 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 September 30, 2018								Nine Months Ended September 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	$	21,453		$	21,272		$	181	$	59,882		$	59,303		$	579
Collaboration	7,163			7,163			—		16,818			16,818			—
Total revenue	28,616			28,435			181		76,700			76,121			579
Net loss	$	(16,486	)	$	(16,667	)	$	181	$	(56,290	)	$	(56,869	)	$	579
Net loss per share - basic and diluted	$	(0.56	)	$	(0.57	)	$	0.01	$	(2.09	)	$	(2.11	)	$	0.02



	September 30, 2018
(in thousands)	As Reported			Balances under previous revenue standard			Effect of Change
Liabilities:
Deferred revenue, current portion	$	8,905		$	8,730		$	175
Stockholders' equity
Accumulated deficit	$	(370,146	)	$	(369,971	)	$	(175	)

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.