Revenue Recognition

9 Months Ended

Sep. 30, 2021

Revenue Recognition [Abstract]

Revenue Recognition

NOTE 3—REVENUE RECOGNITION

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in customer contracts include delivery of laser systems, imaging systems, and consumables as well as certain ancillary services such as training and extended warranties. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract and vary according to the arrangement. Because the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the Company’s contracts do not contain variable consideration. The Company establishes a provision for estimated warranty expense.

Performance Obligations

At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customers. In order to identify performance obligations, the Company considers all of the products or services promised in contracts regardless of whether they are explicitly stated or are implied by customary business practices.

Revenue from products and services transferred to customers at a single point in time accounted for 88% of net revenue for the three and nine months ended September 30, 2021 and 86% and 78% of net revenue for the three and nine months ended September 30, 2020, respectively. The majority of the Company’s revenue recognized at a point in time is for the sale of laser systems and consumables. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during the shipping process.

Revenue from services transferred to customers over time accounted for 12% of net revenue for the three and nine months ended September 30, 2021 and 14% and 22% of net revenue for the three and nine months ended September 30, 2020, respectively. The majority of the Company’s revenue that is recognized over time relates to product training and extended warranties. Deferred revenue attributable to undelivered elements, which primarily consists of product training, totaled approximately $1.0 million and $0.7 million as of September 30, 2021 and December 31, 2020, respectively.

Transaction Price Allocation

The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. 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 in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers.

Significant Judgments

Revenue is recorded for extended warranties over time as the customer benefits from the warranty coverage. This revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. Revenue is recorded for product training as the customer attends a training program or upon the expiration of the obligation, which is generally after nine months.

The Company also has contracts that include both the product sales and product training as performance obligations. In those cases, the Company records revenue for product sales at the point in time when the product has been shipped. The customer obtains control of the product when it is shipped, as all shipments are made FOB shipping point, and after the customer selects its shipping method and pays all shipping costs and insurance. The Company has concluded that control is transferred to the customer upon shipment.

Accounts Receivable

Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs.

Contract Liabilities

The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services and the Company has not transferred control of the goods and/or services. The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):

	September 30,			December 31,
	2021			2020
Undelivered elements (training, installation, product    and support services)	$	1,015		$	670
Extended warranty contracts		1,557			1,609
Total deferred revenue		2,572			2,279
Less: long-term portion of deferred revenue		(294	)		(374	)
Deferred revenue — current	$	2,278		$	1,905

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at September 30, 2021 and December 31, 2020.

The amount of revenue recognized during the nine months ended September 30, 2021 and 2020 that was included in the opening contract liability balance related to undelivered elements was $0.2 million and $0.3 million, respectively. The amounts related to extended warranty contracts was $1.1 million and $2.0 million, for the nine months ended September 30, 2021 and 2020, respectively.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

The Company’s revenues related to the following geographic areas were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
United States	$	5,939	$	4,755	$	17,024	$	10,079
International		3,592		1,784		9,756		4,181
Total net revenue	$	9,531	$	6,539	$	26,780	$	14,260

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue recognized over time	$	1,116	$	898	$	3,269	$	3,143
Revenue recognized at a point in time		8,415		5,641		23,511		11,117
Net revenue	$	9,531	$	6,539	$	26,780	$	14,260

The Company’s sales by end market were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
End-customer	$	5,939	$	5,087	$	17,024	$	9,845
Distributors		3,592		1,452		9,756		4,415
Net revenue	$	9,531	$	6,539	$	26,780	$	14,260

Shipping and Handling Costs and Revenues

Shipping and freight costs are treated as fulfillment costs. For shipments to end-customers, the customer bears the shipping and freight costs and has control of the product upon shipment. For shipments to distributors, the distributor bears the shipping and freight costs, including insurance, tariffs and other import/export costs.