(2)Revenue

The Company primarily earns revenue from payment processing services, and has contractual agreements with its customers that set forth the general terms and conditions of the service relationship, including line item pricing, payment terms and contract duration. Payment processing service revenue is based on a percentage of transaction value and on specified amounts per transaction or service, and is measured as the amount of consideration to which the Company expects to be entitled in exchange for providing services. The Company’s core performance obligation is to stand ready to provide continuous access to the Company’s processing services in order to be able to process as many transactions as its customers require on a daily basis over the contract term as the timing and quantity of transactions to be processed is not determinable. Under a stand-ready obligation, the Company’s performance obligation is defined by each time increment rather than by the underlying activities satisfied over time based on days elapsed. Because the service of standing ready is substantially the same each day and has the same pattern of transfer to the customer, the Company has determined that its stand-ready performance obligation comprises a series of distinct days of service.

The Company also earns revenue from the sale and rental of electronic point-of-sale (“POS”) equipment. The sale of equipment to a customer represents the transfer of a promised good that has a benefit to the customer in conjunction with the payment processing services provided by the Company and, therefore, is accounted for as a separate performance obligation.

The Company’s contractual agreements outline the pricing related to payment processing services and pricing related to the sale or rental of POS equipment. The Company allocates the variable fees charged for payment processing services to the day in which it has the contractual right to bill under the contract. Revenue from the sale of POS equipment is recognized at a point in time when the POS equipment is shipped and title passes to the customer. Revenue from the rental of electronic POS equipment is recognized monthly as earned. The revenue recognized from the sale and rental of POS equipment totaled $10.5 million and $11.1 million for the three months ended June 30, 2019 and 2018, respectively. The revenue recognized from the sale and rental of POS equipment totaled $20.2 million and $21.4 million for the six months ended June 30, 2019 and 2018, respectively.

Commissions payable to referral and reseller partners are recognized as incurred. The Company does not capitalize costs to obtain contracts with customers or costs incurred to fulfill contracts with customers as such amounts are considered immaterial.

The Company follows the requirements of ASC 606-10, Principal Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement and that certain factors should be considered in determining payment processing service revenue reporting.

The determination of gross versus net recognition for interchange and card network fees, commissions and card network processing costs and other fees requires judgment that depends on whether the Company controls the good or service before it is transferred to the merchant or whether the Company is acting as an agent of a third party.

The Company does not determine interchange rates; they are set by the card networks. The rights of the Company to earn service fee revenue from the receipt of fees from merchants are generated by a negotiated agreement with independent sales organizations (“ISOs”) or other third parties. The ISO or third party acts as supplier of products or services by achieving most of the shared risks and rewards as principal in the merchant agreement; the Company passes the ISO’s share of merchant receipts to them as commissions. Card network processing costs are assessed by the card networks for authorization, settlement and card network access services. The Company collects these amounts through the processing cycle and reimburses the card networks. The Company is not responsible for the fulfillment or acceptance of these services.

The Company recognizes its fees charged to customers net of interchange and card network fees, commissions and card network processing costs and other fees assessed to the Company’s merchant customers by other entities. The Company collects these pass-through charges on behalf of the card issuers and payment networks, and does not have the ability to direct the use of or receive the benefits from the services provided by the card issuers or the payment networks.

The table below presents a disaggregation of the Company’s revenue from contracts with customers by division. The Company’s divisions are defined as follows:

Direct – Includes referral relationships with financial institutions, many of which are long-term and on an exclusive basis. These financial institutions provide the Company with access to their brands, while the Company maintains a direct relationship with merchants in order to drive sales, price negotiation, underwriting, boarding and support processes. The Direct division also includes direct sales capabilities and relationships.

Tech-enabled – Includes partnerships with independent software vendors, integrated software dealers, enterprise resource planning software dealers and eCommerce gateway providers. These partnerships function by way of a technical integration between the Company and the third party in which the third party seamlessly passes information to the Company’s systems in order to streamline the merchant boarding process.

Traditional – Represents the Company’s heritage U.S. portfolio composed primarily of ISO relationships.


	Three Months Ended June 30, 2019						Six Months Ended June 30, 2019
	North America		Europe		Total		North America		Europe		Total
	(In thousands)						(In thousands)
Divisions:
Direct	$	40,109	$	35,781	$	75,890	$	75,221	$	68,865	$	144,086
Tech-enabled		29,391		9,080		38,471		55,998		17,549		73,547
Traditional		8,156		—		8,156		16,402		—		16,402
	$	77,656	$	44,861	$	122,517	$	147,621	$	86,414	$	234,035


	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
	North America		Europe		Total		North America		Europe		Total
	(In thousands)						(In thousands)
Divisions:
Direct	$	39,290	$	47,651	$	86,941	$	76,792	$	90,348	$	167,140
Tech-enabled		30,202		13,415		43,617		55,902		25,625		81,527
Traditional		10,333		—		10,333		20,506		—		20,506
	$	79,825	$	61,066	$	140,891	$	153,200	$	115,973	$	269,173