Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.20.2
Revenue Recognition
6 Months Ended
Jun. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition

NOTE 5 - REVENUE RECOGNITION

 

The Company and its subsidiaries generate revenue from sales of systems and products and from customer SaaS and hosting infrastructure fees. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes the Company collects concurrently with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with the Company’s base warranties continue to be recognized as expense when the products are sold (see Note 13).

 

Revenue is recognized when performance obligations under the terms of a contract with our customer are satisfied. Product sales are recognized at a point in time when title transfers, when the products are shipped, or when control of the system is transferred to the customer, which usually is upon delivery of the system and when contractual performance obligations have been satisfied. For products which do not have stand-alone value to the customer separate from the SaaS services provided, the Company considers both hardware and SaaS services a bundled performance obligation. Under the applicable accounting guidance, all of the Company’s billings for equipment and the related cost for these systems are deferred, recorded, and classified as a current and long-term liability and a current and long-term asset, respectively. The deferred revenue and cost are recognized over the service contract life, ranging from one to five years, beginning at the time that a customer acknowledges acceptance of the equipment and service.

 

The Company recognizes revenue for remotely hosted SaaS agreements and post-contract maintenance and support agreements beyond our standard warranties over the life of the contract. Revenue is recognized ratably over the service periods and the cost of providing these services is expensed as incurred. Amounts invoiced to customers which are not recognized as revenue are classified as deferred revenue and classified as short-term or long-term based upon the terms of future services to be delivered. Deferred revenue also includes prepayment of extended maintenance, hosting and support contracts.

 

The Company earns other service revenues from installation services, training and technical support services which are short-term in nature and revenue for these services are recognized at the time of performance or right to invoice.

 

The Company recognizes revenue on non-recurring engineering services over time, on an input-cost method performance basis, as determined by the relationship of actual labor and material costs incurred to date compared to the estimated total project costs. Estimates of total project costs are reviewed and revised during the term of the project. Revisions to project costs estimates, where applicable, are recorded in the period in which the facts that give rise to such changes become known.

 

The Company also derives revenue from leasing arrangements. Such arrangements provide for monthly payments covering product or system sale, maintenance, support and interest. These arrangements meet the criteria to be accounted for as sales-type leases. Accordingly, an asset is established for the “sales-type lease receivable” at the present value of the expected lease payments and revenue is deferred and recognized over the service contract, as described above. Maintenance revenues and interest income are recognized monthly over the lease term.

 

The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on observable prices charged to customers or adjusted market assessment or using expected cost-plus margin when one is available. Adjusted market assessment price is determined based on overall pricing objectives taking into consideration market conditions and entity specific factors.

 

The Company recognizes an asset for the incremental costs of obtaining the contract arising from the sales commissions to employees because the Company expects to recover those costs through future fees from the customers. The Company amortizes the asset over one to five years because the asset relates to the services transferred to the customer during the contract term of one to five years.

 

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed.

 

Deferred product costs consist of logistics visibility solutions equipment costs deferred in accordance with our revenue recognition policy. The Company evaluates the realizability of the carrying amount of the deferred contract costs. To the extent the carrying value of the deferred contract costs exceed the contract revenue, an impairment loss will be recognized.

 

The following table presents the Company’s revenues disaggregated by revenue source for the three- and six-months ended June 30, 2019 and 2020:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2019     2020     2019     2020  
Products   $ 10,643     $ 9,394     $ 17,892     $ 22,602  
Services     5,631       16,371       11,993       33,962  
    $ 16,274     $ 25,765     $ 29,885     $ 56,564  

 

The balances of contract assets, and contract liabilities from contracts with customers are as follows as of December 31, 2019 and June 30, 2020:

 

    December 31, 2019     June 30, 2020  
              (Unaudited)  
                 
Assets:                
Deferred contract costs   $ 2,196     $ 1,735  
Deferred logistics visibility solutions costs   $ 8,530     $ 6,905  
                 
Liabilities:                
Contract liabilities (1)   $ 1,098     $ 794  
Deferred revenue -other (1)     227       281  
Deferred maintenance and SaaS revenue (1)     5,072       5,540  
Deferred logistics visibility solutions product revenue (1)     10,932       8,749  
                 
      17,329       15,364  
Less: Deferred revenue and contract liabilities - Current portion     (8,536 )     (8,608 )
                 
Deferred revenue and contract liabilities - less current portion   $ 8,793     $ 6,756  

 

(1) The Company records deferred revenues when cash payments are received or due in advance of the Company’s performance. For the three- and six-month periods ended June 30, 2019 and 2020, the Company recognized revenue of $6,891 and $2,426, respectively, and $6,238 and $4,600, respectively, that was included in the deferred revenue balance at the beginning of each reporting period. The Company expects to recognize as revenue these deferred revenue balances before the year 2025, when the services are performed and, therefore, satisfies its performance obligation to the customers.