(16) Revenue from Contracts with Customers

The new accounting standard for recognition of revenue, Topic 606, was adopted by the Company for its fiscal year beginning on January 1, 2018. In accordance with Topic 606, the Company recognizes revenue following the five-step model based on the principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The five-step model prescribed under Topic 606 include: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligation. The Company adopted Topic 606 using the modified retrospective transition method. In adopting Topic 606, the Company applied the new guidance only to contracts that were not completed on January 1, 2018. The Company does not disclose information about remaining performance obligations that are part of contracts with an original expected duration of one year or less and does not adjust for the effect of the financing components when the period between customer payment and revenue recognition is one year or less, which are practical expedients provided within Topic 606.

Product Revenue

The adoption of Topic 606 resulted in a change in the pattern of revenue recognition for product revenue. Our revenue and related cost of sales are primarily the result of firm purchase commitments, generally only for a short period of time. Revenue is recognized when our performance obligation has been met, upon shipment to the customer. Selling prices to Merck KGaA for Crinone are determined on an annual and country-by-country basis. Juniper records revenue at a transaction price that most closely approximate what it will be sold for by Merck KGaA. The transaction price is determined by evaluating the Merck KGaA selling price. The Company records as deferred revenue amounts invoiced above the transaction price. Accordingly, product revenue in each period includes both an amount for product shipped to Merck KGaA in the current period recognized at the transaction price and an amount for product shipped by Merck KGaA to its customers in the current period equal to the difference between the invoice price and the transaction price.

Product revenue is recorded net of variable consideration which include volume discounts and price adjustments. Merck KGaA is entitled to a volume discount based on annual purchases. The Company records reserves against revenue on a quarterly basis to reflect the volume discount expected to be earned by Merck KGaA during the year. In addition, any difference between selling price to Merck KGaA and Merck KGaA’s actual net selling price are billed or credited to Merck KGaA in the quarter the product is sold through by Merck KGaA. Product sales are recorded net of value-added tax and similar taxes. Shipping and handling costs are recorded in cost of revenue.

Upon adoption, the Company recorded approximately $5.7 million as an adjustment to both deferred revenue and accumulated deficit. In accordance with Topic 605, the Company would have recognized approximately $8.7 million in product revenue for the three months ended March 31, 2018 and product deferred revenue as of that date would have been $7.3 million.

Service Revenue

The adoption of Topic 606 did not have an impact on how the Company recognizes service revenue.

Juniper recognizes substantially all of the Company’s professional services revenues under written contracts as the services are provided, and only in those situations where collection from the client is reasonably assured. Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenues to each performance obligation based on its relative standalone selling price. When entering into multiple element arrangements, the Company identifies whether its performance obligations under the arrangement represent a distinct good or service or a series of distinct goods or services. A series of distinct goods or services is required to be accounted for as a single performance obligation provided that (i) each distinct good or service in the series promised would meet the criteria to be a performance obligation satisfied over-time; and (ii) the same method would be used to measure the Company’s progress toward complete satisfaction of the performance obligation to transfer each distinct good or service in the series to the customer. If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. The fair value of deliverables under the arrangement may be derived using a “best estimate of selling price” if vendor-specific objective evidence and third-party evidence is not available.

Significant management judgment is required in determining the consideration to be earned under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement. Service revenues from a majority of Juniper’s fixed-price engagements are recognized on a proportional performance method based on the ratio of costs incurred, substantially all of which are labor-related, to the total estimated project costs. The proportional performance method is used for fixed-price contracts because reasonably dependable estimates of the revenues and costs applicable to various stages of a contract can be made, based on historical experience and the terms set forth in the contract, and are indicative of the level of benefit provided to Juniper’s clients. Project costs are classified in costs of services and are based on the direct salary of the employees on the engagement plus all direct expenses incurred to complete the engagement, including any amounts billed to Juniper by its vendors. In the event of a termination, fixed-price contracts generally provide for payment for services rendered up to the termination date. Service revenues also include reimbursements, which include reimbursement for travel and other out-of-pocket expenses, outside consultants, and other reimbursable expenses. Amounts invoiced not yet earned on service revenue are deferred until such time as performance is rendered or the obligation to perform the service is completed for service revenues.

The professional service contracts that Juniper enters into and operates under specify whether the engagement will be billed on a time-and-materials or a fixed-price basis. These engagements generally last three to six months, although some of Juniper’s engagements can be longer in duration. Payments terms vary by the type and services offered. The term between invoicing and when payment is due is not significant. In certain cases, Juniper bills clients prior to work being performed, which requires Juniper to defer revenue in accordance with U.S. GAAP. Revenues from time-and-materials service contracts are recognized as the services are performed based upon hours worked and contractually agreed-upon hourly rates, as well as indirect fees based upon hours worked. Juniper collects value-added tax from its customers for revenue generated out of the United Kingdom for which the customer is not tax exempt and remits such taxes to the appropriate governmental authority. Juniper presents its value added tax on a net basis; therefore, these taxes are excluded form revenues.

The Company generally expenses commission when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. Juniper 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 recognized revenue at the amount to which it has the right to invoice for services performed. For contracts that exceed one year in duration, the Company has recorded contract costs totaling $0.2 million. For the quarter ended March 31, 2018, in accordance with Topic 605, the Company would have recognized a reduction in sales and marketing expense of approximately $4 thousand. The ending balance of prepaid expenses and other current assets as of March 31, 2018 was $0.2 million.

A summary of changes in deferred revenue balances for product and service revenue is as follows:

	Product Revenue			Service Revenue			Total
Opening Balance - December 31, 2017	$	5,888		$	253		$	6,141
Additions		191			335			526
Recognized into Revenue		(150	)		(179	)		(329	)
Recognized into Accumulated Deficit		(5,703	)		—			(5,703	)
Ending Balance - March 31, 2018	$	226		$	409		$	635