Revenue

6 Months Ended

Jun. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue

3.Revenue

The Company generates revenue primarily through the sale and delivery of promised goods or services to customers. Sales prices are documented in the executed sales contract, purchase order or order acknowledgement prior to the transfer of control to the customer. Typical payment terms are 30 days.

Revenue contracts may include multiple products or services, each of which is considered a separate performance obligation. Performance obligations typically include the delivery of promised products, such as breast implants, tissue expanders, BIOCORNEUM, Viality, and SimpliDerm, along with service-type warranties. Other deliverables are sometimes promised but are ancillary and insignificant in the context of the contract as a whole. Revenue is allocated to each performance obligation based on its relative standalone selling price. The Company determines standalone selling prices based on observable prices for all performance obligations with the exception of the service-type warranty under the Platinum20 Limited Warranty Program, or "Platinum20".

The Company introduced Platinum20 in May 2018 on all breast implants implanted in the United States or Puerto Rico on or after May 1, 2018. Additionally, Platinum20 Program applies to all breast implants that are implanted in Canada on or after March 23, 2022. Platinum20 provides for financial assistance for revision surgeries and no-charge contralateral replacement implants upon the occurrence of certain qualifying events. The Company considers Platinum20 to have an assurance warranty component and a service warranty component. The assurance component is recorded as a warranty liability at the time of sale. The Company considers the service warranty component as an additional performance obligation and defers revenue at the time of sale using the expected cost plus a margin approach for the performance obligation. Inputs into the expected cost plus a margin approach include historical incidence rates, estimated replacement costs, estimated financial assistance payouts and an estimated margin.

The liability for unsatisfied performance obligations under the service warranty as of June 30, 2023 were as follows (in thousands):

	Six Months Ended June 30,
	2023
Balance as of December 31, 2022	$	3,508
Additions and adjustments, net		274
Revenue recognized		(1,352	)
Balance as of June 30, 2023	$	2,430
Less short-term portion		(415	)
Long-term portion	$	2,015

The liability for the short-term portion is included in “Accrued and other current liabilities” and the long-term portion is included in “Other liabilities” in the condensed consolidated balance sheets.

Revenue from service warranties are recognized ratably over the term of the agreement. Specifically for Platinum20, the performance obligations are satisfied at the time that the benefits are provided and are expected to be satisfied ratably over the 3 to 24 month period following sale of the product for financial assistance and 20 years for product replacement.

For delivery of promised products, control transfers and revenue is recognized upon shipment, unless the contractual arrangement requires transfer of control when products reach their destination, for which revenue is recognized once the product arrives at its destination. A portion of the Company’s revenue is generated from the sale of consigned inventory maintained at doctor, hospital, and clinic locations. For these products, revenue is recognized at the time the Company is notified by the customer that the product has been used, not when the consigned products are delivered to the customer’s location.

Sales Return Liability

With the exception of the Company’s BIOCORNEUM scar management products, Viality, inventory held on consignment, and products sold to international customers, the Company allows for the return of products from customers within six months after the original sale, which is accounted for as variable consideration. A sales return liability is established based on estimated returns using relevant historical experience taking into consideration recent gross sales and notifications of pending returns, as adjusted for changes in recent industry events and trends. Estimated future sales returns for the current and prior periods are recorded as a reduction of revenue and as a sales return liability in the current period. Actual sales returns for current and prior periods, in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period would be recorded and noted separately as a change in estimate. The following table provides a rollforward of the sales return liability (in thousands):

	Six Months Ended June 30,
	2023			2022
Beginning balance	$	15,773		$	13,399
Addition to reserve for sales activity		98,719			86,279
Actual returns		(101,736	)		(87,184	)
Ending balance	$	12,756		$	12,494