Revenue Recognition

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

The Company’s two reportable segments for which it recognizes revenue are (1) Clinical Services and (2) Advanced Diagnostics. The Clinical Services segment provides various clinical-testing services related to oncology diagnostics, community-based oncology and pathology sales, patient engagement, and clinical decision support. Functions within the Advanced Diagnostics segment include pharma services, informatics, R&D, and minimal residual disease, liquid biopsy and therapy selection business development.

Clinical Services Revenue

The Company’s specialized diagnostic services are performed based on a written test requisition form or an electronic equivalent. The performance obligation is satisfied and revenues are recognized once the diagnostic services have been performed and the results have been delivered to the ordering physician. These diagnostic services are billed to various payers, including client direct billing, commercial insurance, Medicare and other government payers, and patients. Revenue is recorded for all payers based on the amount expected to be collected, which considers implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration the Company expects to receive based on negotiated discounts, historical collection experience, and other anticipated adjustments, including anticipated payer denials.

Advanced Diagnostics Revenue

The Company’s Advanced Diagnostics segment generally enters into contracts with pharmaceutical and biotech customers as well as other contract research organizations (“CROs”) to provide research and clinical trial services. Such services also include validation studies and assay development. The Company records revenue on a unit-of-service basis based on the number of units completed towards the satisfaction of a performance obligation. In addition, certain contracts include upfront fees and the revenue for those contracts is recognized over time as services are performed.

Additional offerings within the Advanced Diagnostics portfolio includes Informatics, which involves the licensing of de-identified data to pharmaceutical and biotech customers in the form of either retrospective records or prospective deliveries of data. Informatics revenue is recognized at a point in time upon delivery of retrospective data or over time for prospective data feeds. The Company negotiates billing schedules and payment terms on a contract-by-contract basis, and contract terms generally provide for payments based on a unit-of-service arrangement.

Amounts collected in advance of services being provided are deferred as contract liabilities on the Consolidated Balance Sheets. The associated revenue is recognized and the contract liability is reduced as the contracted services are subsequently performed. Contract assets are established for revenue recognized but not yet billed. These contract assets are reduced once the customer is invoiced and a corresponding receivable is recorded. Additionally, Advanced Diagnostics incurs sales commissions in the process of obtaining contracts with customers. Sales commissions that are payable upon contract award are recognized as assets and amortized over the expected contract term. The amortization of commission expense is based on the weighted average contract duration for all commissionable awards in the respective business in which the commission expense is paid, which approximates the period over which goods and services are transferred to the customer. For offerings with primarily short-term contracts, such as Informatics, the Company applies the practical expedient which allows costs to obtain a contract to be expensed when incurred, if the amortization period of the assets that would otherwise have been recognized is one year or less. Contract assets and capitalized commissions are included in other current assets and other assets on the Consolidated Balance Sheets.

Most contracts are terminable by the customers, either immediately or according to advance notice terms specified within the contracts. All contracts require payment of fees to the Company for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract.

The following table summarizes the values of contract assets, capitalized commissions and contract liabilities (in thousands):

	September 30, 2023		December 31, 2022
Current contract assets (1)	$	424	$	1,898
Long-term contract assets (2)	—		31
Total assets	$	424	$	1,929
Current capitalized commissions (1)	$	937	$	800
Long-term capitalized commissions (2)	257		715
Total capitalized commissions	$	1,194	$	1,515
Current contract liabilities	$	3,617	$	7,557
Long-term contract liabilities (3)	—		19
Total contract liabilities	$	3,617	$	7,576

(1) Recorded within other current assets on the Consolidated Balance Sheets.

(2) Recorded within other assets on the Consolidated Balance Sheets.

(3) Recorded within other long-term liabilities on the Consolidated Balance Sheets.

Revenue recognized for the three and nine months ended September 30, 2023 related to contract liability balances outstanding at the beginning of the period was $1.4 million and $4.9 million, respectively. Revenue recognized for the three and nine months ended September 30, 2022 related to contract liability balances outstanding at the beginning of the period was $0.7 million and $4.8 million, respectively. Amortization of capitalized commissions for the three and nine months ended September 30, 2023 was $0.2 million and $0.7 million, respectively. Amortization of capitalized commissions for the three and nine months ended September 30, 2022 was $0.3 million and $0.6 million, respectively.

Disaggregation of Revenue

The Company considered various factors for both its Clinical Services and Advanced Diagnostics segments in determining appropriate levels of homogeneous data for its disaggregation of revenue; including the nature, amount, timing, and uncertainty of revenue and cash flows. Clinical Services categories align with the types of customers due to similarities of billing method, level of reimbursement, and timing of cash receipts. Unbilled amounts are accrued and allocated to payer categories based on historical experience. In future periods actual billings by payer category may differ from accrued amounts. Advanced Diagnostics relate to contracts with large pharmaceutical and biotech customers as well as other CROs. Because the nature, timing, and uncertainty of revenue and cash flows are similar and primarily driven by individual contract terms Advanced Diagnostics revenue is not further disaggregated.

The following table details the disaggregation of revenue for both the Clinical Services and Advanced Diagnostics Segments (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Clinical Services
Client direct billing	$	86,160	$	73,234	$	246,159	$	208,123
Commercial Insurance	21,722		17,105		64,772		53,904
Medicare and Medicaid	19,624		15,795		54,407		48,427
Self-Pay	47		28		240		134
Total Clinical Services	$	127,553	$	106,162	$	365,578	$	310,588
Advanced Diagnostics	24,401		22,620		70,513		60,435
Total Revenue	$	151,954	$	128,782	$	436,091	$	371,023