2.Revenue

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements under Accounting Standards Codification (ASC) Topic 605. The new guidance was the result of a joint project between the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop common revenue standards for U.S. GAAP and International Financial Reporting Standards. The core principle of the new guidance is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance was effective as of January 1, 2018 and was applied on a modified retrospective basis. The Company elected the practical expedient and only evaluated contracts for which substantially all revenue had not been recognized under ASC 605 with the cumulative effect of the new guidance recorded as of the date of initial application. The impact of adoption was an increase to beginning retained earnings of $8.2 million, offset in part by a $2.1 million impact related to taxes. As the adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements, transitional disclosures were not provided.

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The key elements of ASC 606 are: 1) identifying a contract with the customer; 2) identifying the performance obligations in the contract; 3) determining the transaction price; 4) allocating the transaction price to the performance obligations in the contract; and 5) recognizing revenue when (or as) each performance obligation is satisfied.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Some of the Company’s contracts have multiple performance obligations, most commonly due to providing additional goods or services along with a system such as installation, accessories, parts and services. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service being provided to the customer. The Company’s best evidence of standalone selling price is its normal selling pricing and discounting practices for the specific product or service when sold on a standalone basis. Alternatively, when not sold separately, the Company may determine standalone selling price using an expected cost plus a margin approach.

The Company’s performance obligations are typically satisfied at a point in time, most commonly either on shipment or customer acceptance. Certain performance obligations, such as maintenance contracts and extended warranty, are recognized over time based on the contractual obligation period. In addition, certain arrangements to provide more customized deliverables may be satisfied over time based on the extent of progress towards completion. Typically, progress is measured using a cost-to-cost method based on cost incurred to date relative to total estimated costs upon completion as this best depicts the transfer of control to the customer. Application of the cost-to-cost method requires the Company to make reasonable estimates of the extent of progress toward completion and the total costs the Company expects to incur. Losses are recorded immediately when we estimate that contracts will ultimately result in a loss.

The Company includes costs incurred in connection with shipping and handling of products within selling, general and administrative costs. Amounts billed to customers in connection with these costs are included in total revenues. When control of the goods transfer prior to the completion of the Company’s obligation to ship the products to its customers, the Company has elected the practical expedient to account for the shipping services as a fulfillment cost. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period is one year or less or the amount is immaterial. The Company excludes from the transaction price all taxes assessed by a governmental authority on revenue-producing transactions that are collected by the Company from a customer.

The Company requires an advance deposit based on the terms and conditions of contracts with customers for many of its contracts. Typically, revenue is recognized within one year of receiving an advance deposit. The Company does not have any material payment terms that extend beyond one year. For contracts where an advance payment is received greater than one year from expected revenue recognition, or a portion of the payment due extends beyond one year, the Company determined it does not constitute a significant financing component. There is minimal variable consideration included in the transaction price of the Company’s contracts.

The Company’s revenues and cash flows may be adversely impacted by unfavorable changes in economic or political conditions in the countries and markets in which they operate, including, among others, adverse changes in interest rates or tax rates, volatility in financial and commodity markets, contraction in the availability of credit in the marketplace, and changes in capital spending patterns. Economic factors that could adversely influence demand for the Company’s products include uncertainty about global economic conditions leading to reduced levels of investment, changes in government spending levels and/or priorities, the size and availability of government budgets, customers’ and suppliers’ access to credit and other macroeconomic factors affecting government, academic or industrial spending behavior. Slower economic growth or deterioration in economic conditions could result in a decrease in government funding for scientific research, a delay in orders from current or potential customers or a reduction in purchases of our products. The Company cannot predict how changes in economic conditions or political instability will affect customers and suppliers or how any negative impact on customers and suppliers might adversely impact the Company’s business results or financial condition.

The following table presents the Company’s revenues by Group and end customer geographical location for the three and six month periods ended June 30, 2018 (in millions):

	Three Months Ended June 30,			Six Months Ended June 30,
	2018			2018
Revenue by Group:
Bruker BioSpin	$	139.9		$	271.7
Bruker CALID	128.0			259.3
Bruker Nano	134.5			258.4
BEST	42.7			88.3
Eliminations	(1.4		)	(2.3		)

Total revenue	$	443.7		$	875.4

	Three Months Ended June 30,		Six Months Ended June 30,
	2018		2018
Revenue by End Customer Geography:
United States	$	108.4	$	213.2
Germany	48.9		90.4
Rest of Europe	111.9		231.8
Asia Pacific	135.5		262.4
Other	39.0		77.6

Total revenue	$	443.7	$	875.4

Revenue for the Company recognized at a point in time versus over time is as follows for the three and six month periods ended June 30, 2018 (in millions):

	Three Months Ended June 30,		Six Months Ended June 30,
	2018		2018
Revenue recognized at a point in time	$	405.3	$	800.5
Revenue recognized over time	38.4		74.9

Total revenue	$	443.7	$	875.4

Remaining Performance Obligations

Remaining performance obligations represent the aggregate transaction price allocated to a promise to transfer a good or service which are fully or partially unsatisfied at the end of the period. As of June 30, 2018, remaining performance obligations were approximately $1,025.6 million. The Company expects to recognize revenue on approximately 77.9% of the remaining performance obligations over the next twelve months and the remaining performance obligations primarily within one to three years.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue, customer deposits and billings in excess of revenue recognized (contract liabilities) on the Company’s unaudited condensed consolidated balance sheets.

Contract assets—Most of the Company’s long-term contracts are billed as work progresses in accordance with the contract terms and conditions, either at periodic intervals or upon achievement of certain milestones. Billing often occurs subsequent to revenue recognition, resulting in contract assets. Contract assets are generally classified as current assets in the unaudited condensed consolidated balance sheets. The balance of contract assets as of June 30, 2018 and January 1, 2018, the date of adoption of ASC 606, was $22.0 million and $12.8 million, respectively. The increase in the contract asset balance during the six month period ended June 30, 2018 is primarily a result of foreign currency translation and contracts which have been recognized as revenue during the six month period ending June 30, 2018 for which billing cannot contractually occur as of June 30, 2018.

Contract liabilities—The Company often receives cash payments from customers in advance of the Company’s performance, resulting in contract liabilities. These contract liabilities are classified as either current or long-term in the unaudited condensed consolidated balance sheet based on the timing of when revenue recognition is expected. As of June 30, 2018 and January 1, 2018, the date of adoption of ASC 606, contract liabilities were $288.2 million and $291.3 million, respectively. The decrease in the contract liability balance during the six month period ended June 30, 2018 is primarily a result of satisfying performance obligations and foreign currency translation which were offset in part by new cash payments received. Approximately $100.7 million that was included in the contract liability balance at the date of adoption was recognized as revenue during the period.