Revenue from Contract with Customer

12 Months Ended

Jan. 03, 2021

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

Revenue

Nature of goods and services

The following is a description of principal activities, by reportable segments, from which the Company generates its revenue. For more detailed information about the reportable segments, see Note 24.

i. Discovery & Analytical Solutions

The Discovery & Analytical Solutions segment of the Company principally generates revenue from sales of (a) instruments, consumables and services in the applied markets and (b) instruments, reagents, informatics, detection and imaging technologies, extended warranties, training and services in the life sciences market. Products and services may be sold separately or in bundled packages. The typical length of a contract for service is 12 to 36 months.

For bundled packages, the Company accounts for individual products and services separately if they are distinct - i.e. if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate products and services in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the products, extended warranties, and services. For items that are not sold separately, the Company estimates stand-alone selling prices by reference to the amount charged for similar items on a stand-alone basis.

The Company sells products and services predominantly through its direct sales force. As a result, the use of distributors is generally limited to geographic regions where the Company has no direct sales force. The Company does not offer product return or exchange rights (other than those relating to defective goods under warranty) or price protection allowances to its customers, including distributors. Payment terms granted to distributors are the same as those granted to end-customers and payments are not dependent upon the distributor's receipt of payment from their end-user customers.

In instances where the timing of revenue recognition differs from the timing of invoicing, the Company determined that the contracts generally do not include a significant financing component. The primary purpose of its invoicing terms is to provide customers with simplified and predictable ways of purchasing products and services, rather than to receive financing from the customers or to provide customers with financing. Examples include invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period, and multi-year software licenses or software subscriptions that are invoiced annually with revenue recognized upfront. In limited circumstances where the Company provides the customer with a significant benefit of financing, the Company uses the practical expedient and only adjusts the transaction price for the effects of the time value of money and only on contracts where the duration of financing is more than one year.

Products and services	Nature, timing of satisfaction of performance obligations, and significant payment terms
Instruments	For instruments that include installation, and if the installation meets the criteria to be considered a separate performance obligation, product revenue is generally recognized upon delivery or when title has transferred to the customer, which is generally the point in time where control of the products has been transferred to customers, and installation revenue is recognized when the installation is complete. Certain of the Company's products require specialized installation and configuration at the customer's site. Revenue for these products is deferred until installation is complete and customer acceptance has been received. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 to 60 days.
Consumables and reagents	The Company recognizes revenue from the sale of consumables and reagents upon delivery or when title has transferred to the customer, which is generally the point in time where control of the products has been transferred to customers. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 days.
Software licenses and subscriptions	Customers may purchase perpetual or term licenses, or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. The Company sells its software subscriptions or software licenses with maintenance services and, in some cases, with consulting services. The Company recognizes revenue for the software upfront at the point in time when the software is made available to the customer. For maintenance and consulting services, revenue is recognized ratably over the period in which the services are provided. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. Subscription contracts are typically billed annually on the anniversary date of the contract. Software subscriptions and maintenance service contracts are non-cancelable.
Cloud services	Cloud services, which allow customers to use hosted software over the contract period without taking possession of the software, are provided on either a subscription or consumption basis. Revenue related to cloud services provided on a subscription basis is recognized ratably over the contract period. Revenue related to cloud services provided on a consumption basis, such as the amount of storage used in a period, is recognized based on the customer utilization of such resources. Payment terms are generally net 30 days from signing of contract and contracts are non-cancelable.
Extended warranty	The Company recognizes revenue for extended warranties on a straight-line basis over the extended warranty period in service revenue. In the majority of countries in which the Company operates, the customary warranty period is one year and the extended warranty covers periods beyond year one. Customers typically pay for extended warranties on an annual basis over the term of the warranty. In general, customers can cancel the extended warranty at any time with 30 days notice without significant penalty.
Laboratory services and training	The Company's service offerings include service contracts, field service, including related time and materials, and training. The Company recognizes revenue as the services are performed. Revenue for the service contracts is recognized over the contract period or at a point in time when the service is billable based on time and materials. The Company recognizes revenue as training is provided in service revenue. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In general, customers can cancel the service contracts at any time with 30 to 90 days notice without significant penalty.

ii. Diagnostics

The Diagnostics segment of the Company principally generates revenue from sales of instruments, solutions, consumables, reagents, extended warranties and services in the diagnostics market. Products and services may be sold separately or in bundled packages.

For bundled packages, the Company accounts for individual products and services separately if they are distinct - i.e. if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate products and services in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the products, extended warranties, and services. For items that are not sold separately, the Company estimates stand-alone selling prices by reference to the amount charged for similar items on a stand-alone basis.

The Company sells products and services predominantly through its direct sales force. As a result, the use of distributors is generally limited to geographic regions where the Company has no direct sales force. The Company does not offer product return or exchange rights (other than those relating to defective goods under warranty) or price protection allowances to its customers, including distributors. Payment terms granted to distributors are the same as those granted to end-customers and payments are not dependent upon the distributor's receipt of payment from their end-user customers.

In instances where the timing of revenue recognition differs from the timing of invoicing, the Company determined that the contracts generally do not include a significant financing component. The primary purpose of its invoicing terms is to provide customers with simplified and predictable ways of purchasing products and services, rather than to receive financing from the customers or to provide customers with financing. Examples include invoicing at the beginning of a storage period with revenue recognized ratably over the contract period. In limited circumstances where the Company provides the customer with a significant benefit of financing, the Company uses the practical expedient and only adjusts the transaction price for the effects of the time value of money and only on contracts where the duration of financing is more than one year.

Products and services	Nature, timing of satisfaction of performance obligations, and significant payment terms
Instruments	For instruments that include installation, and if the installation meets the criteria to be considered a separate performance obligation, product revenue is generally recognized upon delivery or when title has transferred to the customer, which is generally the point in time where control of the products has been transferred to customers, and installation revenue is recognized when the installation is complete. Certain of the Company's products require specialized installation and configuration at the customer's site. Revenue for these products is deferred until installation is complete and customer acceptance has been received. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 to 60 days.
Consumables and reagents	The Company recognizes revenue from the sale of consumables and reagents upon delivery or when title has transferred to the customer, which is generally the point in time where control of the products has been transferred to customers. Payment terms and conditions vary, although terms generally include a requirement of payment within 30 days.
Solutions	When the Company sells the instrument and reagents that work only on those instruments to a customer or distributor, the Company considers the instrument and reagents as separate performance obligations. The Company recognizes revenue when an instrument is sold to the customer upon delivery or when title has transferred to the customer, which is generally the point in time where control of the products has been transferred to customers. Revenue from the sale of reagents is also recognized at the time of delivery or when title has transferred to the customer. Payment terms for instrument and reagent sales are usually net 30 days from invoice date. When the Company places the instrument at the customer's site and sells the reagents to a customer, the instrument and reagents are accounted for together as one performance obligation. The Company does not charge a fee for the use of the instrument and retains ownership of the placed instrument. The Company has a right to remove the instrument and replace it with another instrument at the customer's site at any time throughout the contract term. The Company recognizes revenue upon delivery of reagents, which is the point in time where the Company has performed its obligation to provide a screening solution to the customer. Payment terms are usually net 30 days from invoice date. Payment terms for certain contracts are based on equal installments over the duration of the contract.

Extended warranty

The Company recognizes revenue for extended warranties on a straight-line basis over the extended warranty period in service revenue. In the majority of countries in which the Company operates, the customary warranty period is one year and the extended warranty covers periods beyond year one. Customers typically pay for extended warranties on an annual basis over the term of the warranty. In general, customers can cancel the extended warranty at any time with 30 days notice without significant penalty.

Services

The Company's service offerings include genetic testing, COVID-19 testing, cord blood processing and storage, and training. The Company recognizes revenue for the genetic testing, cord blood processing and training as the services are performed in service revenue. Revenue for the storage contracts are recognized over the contract period. Storage is typically for a period of 1, 20, or 25 years or lifetime. Lifetime storage is recognized over a certain period that is based on the life expectancy estimate from Social Security data. For genetic testing and cord blood processing, customers pay the fee in full at the point of sale. The fee is non-refundable unless the cord blood is non-viable for storage. For storage, customers are required to pay the storage fees in full upfront. Storage fees are refundable to the customer on a pro-rated basis if the contract is canceled. In August 2020, the Company entered into a contract with the State of California to perform COVID-19 testing for a term of 14 months with automatic renewal for two successive terms of one year unless the State of California provides notice of termination within 90 days prior to expiration of the current term. The Company has determined that providing monthly testing capacity and individual tests are two separate performance obligations. The pricing in the contract is variable based on the testing capacity and the number of testing results provided in a month. The customer is entitled to a credit on previous tests such that, at the conclusion of the contract, the customer will pay, on average, the price per test result based on the highest volume. The Company allocates the contract consideration to each of these performance obligations based on estimated stand-alone selling price. As the stand-alone selling price is not directly observable, the Company estimates stand-alone selling prices based on the expected cost plus margin approach. The Company recognizes revenue for the monthly testing capacity on a per day basis once the Company has confirmed that it has met the requested capacity level. The Company recognizes revenue for the individual tests as the tests are performed. The amount recognized per test is based on the Company's forecast of tests to be performed per month over the contract period. The contract includes upfront prepayments based on completion of milestones that are non-refundable except due to breach of contract. These prepayments are recorded as contract liabilities and will be recognized as revenue on a per test basis. Monthly testing capacity is billed one month in advance and individual tests are billed monthly for the duration of the contract. Payment terms are net 45 days from invoice date.

Disaggregation of revenue

In the following tables, revenue is disaggregated by primary geographical market, end-markets and timing of revenue recognition. The tables also include a reconciliation of the disaggregated revenue with the reportable segments revenue.

	Reportable Segments
	For the fiscal year ended
	January 3, 2021						December 29, 2019
	Discovery & Analytical Solutions		Diagnostics		Total		Discovery & Analytical Solutions		Diagnostics		Total
	(In thousands)
Primary geographical markets
Americas	$	695,960	$	750,641	$	1,446,601	$	717,205	$	401,591	$	1,118,796
Europe	490,789		864,687		1,355,476		495,768		291,610		787,378
Asia	529,054		451,614		980,668		533,188		444,311		977,499
	$	1,715,803	$	2,066,942	$	3,782,745	$	1,746,161	$	1,137,512	$	2,883,673
Primary end-markets
Diagnostics	$	—	$	2,066,942	$	2,066,942	$	—	$	1,137,512	$	1,137,512
Life sciences	1,032,209		—		1,032,209		977,200		—		977,200
Applied markets	683,594		—		683,594		768,961		—		768,961
	$	1,715,803	$	2,066,942	$	3,782,745	$	1,746,161	$	1,137,512	$	2,883,673
Timing of revenue recognition
Products and services transferred at a point in time	$	1,195,249	$	1,891,482	$	3,086,731	$	1,276,499	$	1,053,974	$	2,330,473
Services transferred over time	520,554		175,460		696,014		469,662		83,538		553,200
	$	1,715,803	$	2,066,942	$	3,782,745	$	1,746,161	$	1,137,512	$	2,883,673

Contract Balances

Contract assets: The unbilled receivables (contract assets) primarily relate to the Company's right to consideration for work completed but not billed at the reporting date. The unbilled receivables are transferred to trade receivables when billed to customers. Contract assets are generally classified as current assets and are included in "Accounts receivable, net" in the consolidated balance sheets. The balances of contract assets as of January 3, 2021 and December 29, 2019 were $59.5 million and $37.0 million, respectively. The amount of unbilled receivables recognized at the beginning of fiscal year 2020 that were transferred to trade receivables during the fiscal year ended January 3, 2021 was $33.2 million. The increase in unbilled receivables during the fiscal year ended January 3, 2021 as a result of recognition of revenue before billing to customers, excluding amounts transferred to trade receivables during the period, amounted to $55.7 million. The amount of unbilled receivables recognized at the beginning of fiscal year 2019 that were transferred to trade receivables during the fiscal year ended December 29, 2019 was $17.3 million. The increase in unbilled receivables during the fiscal year ended December 29, 2019 as a result of recognition of revenue before billing to customers, excluding amounts transferred to trade receivables during the period, amounted to $22.4 million.

Contract liabilities: The contract liabilities primarily relate to the advance consideration received from customers for products and related installation for which transfer of control has not occurred at the balance sheet date. Contract liabilities are classified as either current in "Accounts payable" or "Accrued expenses and other current liabilities" or as long-term in "Long-term liabilities" in the consolidated balance sheets based on the timing of when the Company expects to recognize revenue. The balances of contract liabilities as of January 3, 2021 and December 29, 2019 were $238.1 million and $29.9 million, respectively. The increase in contract liabilities during the fiscal year ended January 3, 2021 due to cash received, excluding amounts recognized as revenue during the period, was $235.5 million. The amount of revenue recognized during the fiscal year ended January 3, 2021 that was included in the contract liability balance at the beginning of the period was $27.3 million. The increase in contract liabilities during the fiscal year ended December 29, 2019 due to cash received, excluding amounts recognized as revenue during the period, was $20.4 million. The amount of revenue recognized during the fiscal year ended December 29, 2019 that was included in the contract liability balance at the beginning of the period was $21.2 million.

Contract costs: The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be longer than one year. The Company determined that certain sales incentive programs meet the requirements to be capitalized. Total capitalized costs to obtain a contract were immaterial during the period and are included in other current and long-term assets on the consolidated balance sheet. The Company applies a practical expedient to

expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. These costs include the Company's internal sales force compensation program, as the Company determined that annual compensation is commensurate with annual sales activities.

Transaction price allocated to the remaining performance obligations

The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. The estimated revenue expected to be recognized beyond one year in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the period are not material to the Company. The remaining performance obligations primarily include noncancelable purchase orders and noncancelable software subscriptions and cloud service contracts.