Revenue recognition and accounts receivable

9 Months Ended

Sep. 30, 2022

Revenue Recognition And Accounts Receivable [Abstract]

Revenue recognition and accounts receivable

9. Revenue recognition and accounts receivable

Revenue Recognition

The Company has two reporting segments, which consist of Global Spine and Global Orthopedics. Within the Global Spine reporting segment there are three product categories: Bone Growth Therapies, Spinal Implants, and Biologics.

The table below presents net sales by major product category by reporting segment:

	Three Months Ended September 30,
(U.S. Dollars, in thousands)	2022		2021		Change
Bone Growth Therapies	$	46,531	$	45,168		3.0	%
Spinal Implants		25,857		28,151		-8.1	%
Biologics		13,798		12,806		7.7	%
Global Spine		86,186		86,125		0.1	%
Global Orthopedics		27,810		26,303		5.7	%
Net sales	$	113,996	$	112,428		1.4	%

	Nine Months Ended September 30,
(U.S. Dollars, in thousands)	2022		2021		Change
Bone Growth Therapies	$	136,244	$	137,821		-1.1	%
Spinal Implants		80,693		83,943		-3.9	%
Biologics		42,686		41,351		3.2	%
Global Spine		259,623		263,115		-1.3	%
Global Orthopedics		78,861		76,300		3.4	%
Net sales	$	338,484	$	339,415		-0.3	%

Product Sales and Marketing Service Fees

The table below presents product sales and marketing service fees, which are both components of net sales:

	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. Dollars, in thousands)	2022		2021		2022		2021
Product sales	$	100,485	$	100,004	$	296,652	$	299,214
Marketing service fees		13,511		12,424		41,832		40,201
Net sales	$	113,996	$	112,428	$	338,484	$	339,415

Product sales primarily consist of the sale of bone growth therapies devices, spinal implants products, and orthopedics products. Marketing service fees are received from MTF Biologics based on total sales of biologics tissues and relate solely to the Global Spine reporting segment.

Accounts receivable and related allowances

The following table provides a detail of changes in the Company’s allowance for expected credit losses for the three and nine months ended September 30, 2022 and 2021:

(U.S. Dollars, in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Allowance for expected credit losses beginning balance	$	5,589		$	4,471		$	4,944		$	4,848
Current period provision for expected credit losses		574			590			1,713			376
Write-offs charged against the allowance and other		10			(54	)		(236	)		(134	)
Effect of changes in foreign exchange rates		(225	)		(79	)		(473	)		(162	)
Allowance for expected credit losses ending balance	$	5,948		$	4,928		$	5,948		$	4,928

Contract Liabilities

The Company’s contract liabilities largely related to a prepayment of $13.9 million received in April 2020 from the Centers for Medicare and Medicaid Service ("CMS") as part of the Accelerated and Advance Payment Program of the Coronavirus Aid, Relief, and Economic Security Act. The remaining balance of the contract liability was recouped by CMS during the second quarter of 2022.

The following table provides a detail of changes in the Company’s contract liability associated with the Accelerated and Advanced Payment Program for the three and nine months ended September 30, 2022 and 2021:

(U.S. Dollars, in thousands)	Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022			2021
Contract liability beginning balance	$	—	$	10,971		$	4,791		$	13,851
Recoupment recognized in net sales		—		(3,071	)		(4,791	)		(5,951	)
Contract liability ending balance	$	—	$	7,900		$	—		$	7,900

Other Contract Assets

The Company’s contract assets, excluding accounts receivable (“Other Contract Assets”), largely consist of payments made to certain distributors to obtain contracts, gain access to customers in certain territories, and to provide the benefit of exclusive distribution of the Company's products. Other Contract Assets are included in other long-term assets or other current assets, dependent upon the original term of the related agreement, and totaled $1.3 million and $1.4 million as of September 30, 2022, and December 31, 2021, respectively.