(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 $12.2 million and $10.8 million for the three months ended September 30, 2019 and 2018, respectively. The revenue recognized from the sale and rental of POS equipment totaled $32.4 million and $32.1 million for the nine months ended September 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, card network fees, commissions 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 frequently enters into agreements with third parties under which the third party engages the Company to provide payment processing services to all of their customers. Under these agreements the third party acts as supplier of products or services by achieving most of the shared risks and rewards of customer contracts; the Company passes the third party’s share of merchant receipts to them as commissions. The Company incurs interchange and card network pass-through charges from the card issuers and payment networks respectively, 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 Company has no discretion over which card issuing bank will be used to process a transaction and is unable to direct the activity of the merchant to another card issuing bank. Interchange and card network rates are pre-established by the card networks, and the Company has no latitude in determining these fees.

Based on these factors, the Company has determined that it is acting as an agent with respect to these services. Revenue generated from payment processing is presented net of interchange and card network fees paid to the card issuing banks and card networks respectively.

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 long-term, exclusive referral relationships with leading financial institutions. In the aggregate, these banks represent more than 12,000 branch locations which actively pursue new merchant relationships on the Company’s behalf. These financial institutions provide the Company with access to their brands, significantly enhancing the Company’s credibility and recognition. The Company also utilizes a direct sales force to build and maintain direct relationships with its merchants and other referral partners in order to control sales, price negotiation, underwriting, boarding, and support processes.

Tech-enabled – Includes partnerships with independent software vendors, integrated software dealers, enterprise resource planning (“ERP”) 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. The Company also drives growth through its own ERP integrations, which support its B2B offering, and its proprietary eCommerce gateway.

Traditional – Represents the Company’s heritage U.S. portfolio composed primarily of independent sales organization (“ISO”) relationships. The Company is not focused on this sales model, and it will represent an increasingly smaller portion of the business over time.


	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
	North America		Europe		Total		North America		Europe		Total
	(In thousands)						(In thousands)
Divisions:
Direct	$	38,025	$	36,383	$	74,408	$	113,246	$	105,248	$	218,494
Tech-enabled		28,914		10,958		39,872		84,912		28,507		113,419
Traditional		8,083		—		8,083		24,485		—		24,485
	$	75,022	$	47,341	$	122,363	$	222,643	$	133,755	$	356,398


	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
	North America		Europe		Total		North America		Europe		Total
	(In thousands)						(In thousands)
Divisions:
Direct	$	40,946	$	51,385	$	92,331	$	117,738	$	141,733	$	259,471
Tech-enabled		28,855		13,886		42,741		84,757		39,511		124,268
Traditional		9,686		—		9,686		30,192		—		30,192
	$	79,487	$	65,271	$	144,758	$	232,687	$	181,244	$	413,931