Revenue From Contracts With Customers

The Company derives revenue from the sale or license of (i) multi-client and proprietary data, imaging services and E&P Advisors consulting services within its E&P Technologies & Services segment; (ii) seismic data acquisition systems and other seismic equipment, (iii) seismic command and control software systems and software solutions for operations management within its Operations Optimization segment; and (iv) a full suite of technology and services within its Ocean Bottom Integrated Technologies segment. All revenues of the E&P Technology & Services and Ocean Bottom Integrated Technologies segments and the services component of revenues for the Optimization Software & Services group as part of the Operations Optimization segment are classified as services revenues. All other revenues are classified as product revenues.

The Company uses a five-step model to determine proper revenue recognition from customer contracts. Revenue is recognized when (i) a contract is approved by all parties; (ii) the goods or services promised in the contract are identified; (iii) the consideration we expect to receive in exchange for the goods or services promised is determined; (iv) the consideration is allocated to the goods and services in the contract; and (v) control of the promised goods or services is transferred to the customer. The Company does not disclose the value of contractual future performance obligations such as backlog with an original expected length of one year or less within the footnotes.

Multi-client and Proprietary Surveys, and Imaging and E&P Advisors Services - As multi-client seismic surveys are being designed, acquired or processed (the “New Venture” phase), the Company enters into non-exclusive licensing arrangements with its customers, who pre-fund or underwrite these programs in part. License revenues from these surveys are recognized during the New Venture phase as the seismic data is acquired and/or processed on a proportionate basis as work is performed and control is transferred to the customer. Under this method, the Company recognizes revenue based upon quantifiable measures of progress, such as kilometers acquired or surveys of performance completed to date. Upon completion of a multi-client seismic survey, it is considered “on-the-shelf,” and licenses to the survey data are granted to customers on a non-exclusive basis.

The Company also performs seismic surveys, imaging and other services under contracts to specific customers, whereby the seismic data is owned by those customers. The Company recognizes revenue as the seismic data is acquired and/or processed on a proportionate basis as work is performed. The Company uses quantifiable measures of progress consistent with its multi-client seismic surveys.

Acquisition Systems and Other Seismic Equipment - For sales of seismic data acquisition systems and other seismic equipment, the Company recognizes revenue when control of the goods has transferred to the customer. Transfer of control generally occurs when (i) the Company has a present right to payment; (ii) the customer has legal title to the asset; (iii) the Company has transferred physical possession of the asset; (iv) the customer has significant rewards of ownership; and/or (v) the customer has accepted the asset.

Software - Licenses for the Company’s navigation, survey design and quality control software systems provide the customer with a right to use the software. The Company offers usage-based licenses under which it receives a monthly fee based on the number of vessels and licenses used. For these usage-based licenses, revenue is recognized as the performance obligations are performed over the contract term, which is generally two to five years. In addition to usage-based licenses, the Company offers perpetual software licenses as it exists when made available to the customer. Revenue from these licenses is recognized upfront at the point in time when the software is made available to the customer.

These arrangements generally include the Company providing related services, such as training courses, engineering services and annual software maintenance. The Company allocates consideration to each element of the arrangement based upon directly observable or estimated standalone selling prices. Revenue is recognized for these services as control transfers to the customer over time.

Ocean Bottom Integrated Technologies - The Company recognizes revenue as the seismic data is acquired and control transfers to the customer. The Company uses quantifiable measures of progress consistent with our multi-client surveys. In connection with acquisition contracts, the Company may receive revenues for preparation and mobilization of equipment and personnel, capital improvements to vessels, or demobilization activities. The Company defers the revenues earned and incremental costs incurred that are directly related to these activities and recognizes such revenues and costs over the primary contract term of the acquisition project as we transfer the goods and services to the customer. The Company recognizes the costs of relocating vessels without contracts to more promising market sectors as such costs are incurred.

Revenue by Geographic Area

The following table is a summary of net revenues by geographic area (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Net revenues by geographic area:
Latin America	$	19,910	$	34,561	$	37,356	$	53,318
North America	13,095		9,374		25,452		30,639
Europe	8,202		11,137		19,811		28,201
Asia Pacific	3,718		3,733		11,581		15,318
Africa	1,121		1,187		8,362		2,660
Middle East	717		632		1,907		1,713
Commonwealth of Independent States	437		471		982		7,803
Total	$	47,200	$	61,095	$	105,451	$	139,652

See Footnote 3 “Segment Information” of Footnotes to Unaudited Condensed Financial Statements for revenue by segment for the three and nine months ended September 30, 2018 and 2017.

Unbilled Receivables

Unbilled receivables relate to revenues recognized on multi-client surveys, imaging services and Devices equipment repairs on a proportionate basis, and on licensing of multi-client data libraries for which invoices have not yet been presented to the customer. The following table is a summary of unbilled receivables (in thousands):



	September 30, 2018		December 31, 2017
New Venture	$	20,056	$	33,183
Imaging Services	4,685		4,121
Devices	983		—
Total	$	25,724	$	37,304

The changes in unbilled receivables were as follows (in thousands):




Unbilled Receivables at December 31, 2017	$	37,304
Recognition of unbilled receivables	86,212
Revenues billed to customers	(97,792		)
Unbilled receivables at September 30, 2018	$	25,724

Deferred Revenue

Billing practices are governed by the terms of each contract based upon achievement of milestones or pre-agreed schedules. Billing does not necessarily correlate with revenue recognized on a proportionate basis as work is performed and control is transferred to the customer. Deferred revenue represents cash received in excess of revenue not yet recognized as of the reporting period, but will be recognized in future periods. The following table is a summary of deferred revenues (in thousands):



	September 30, 2018		December 31, 2017
New Venture	$	7,880	$	6,548
Imaging Services	271		676
Devices	1,198		633
Optimization Software & Services	978		1,053
Total	$	10,327	$	8,910

The changes in deferred revenues were as follows (in thousands):




Deferred revenue at December 31, 2017	$	8,910
Cash collected in excess of revenue recognized	21,654
Recognition of deferred revenue^(a)	(20,237		)
Deferred revenue at September 30, 2018	$	10,327


^(a)	The majority of deferred revenue recognized relates to Company’s Ventures group.

The Company expects to recognize all deferred revenue within the next 12 months.

Credit Risks

At September 30, 2018, the Company had one multinational oil customer with a balance of 29% of its total combined accounts and unbilled receivable balances. The Company had one multinational oil customer that comprised 18% of its total net revenues for the nine months ended September 30, 2018.

The loss of this customer or deterioration in this customer’s relationship with the Company could have a material adverse effect on results of operations and financial condition of the Company.