Cryoport, Inc.CYRX
Cryoport, Inc. Revenue Disclosure
Note 13. Revenue Recognition
In May 2014, the FASB issued Accounting Standards Update ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which modifies how all entities recognize revenue. Topic 606 outlines a comprehensive five-step revenue recognition 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. We adopted Topic 606 on January 1, 2018 using the modified retrospective transition method. The adoption of Topic 606 did not have a material effect on our financial statements or results of operations, and no cumulative catch-up adjustment to the opening balance of retained earnings was required. We used the related practical expedients that allow us to not disclose the transaction price allocated to remaining unsatisfied obligations and an explanation of when we expect to recognize the related revenue.
Revenues are recognized when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.
Nature of Goods and Services
The Company provides Shippers to its customers and charges a fee in exchange for the use of the Shipper under long-term agreements with customers. The Company’s arrangements convey to the customers the right to use the Shippers over a period of time. The Company retains title to the Shippers and provides its customers the use of the Shipper for a specified shipping cycle. At the culmination of the customer’s shipping cycle, the Shipper is returned to the Company.
The vast majority of our revenues are covered under long-term agreements. We have determined that individual Statements of Work (“SOW”), whose terms and conditions taken with a Master Services Agreement (“MSA”), create the Topic 606 contracts which are generally short-term in nature (e.g., 15-day shipping cycle). Our agreements (including SOWs) generally do not have multiple performance obligations and, therefore, do not require an allocation of a single price amongst multiple goods or services. Prices under these agreements are generally fixed. The Company recognizes revenue for the use of the shipper at the time of the delivery of the shipper to the end user of the enclosed materials, and at the time that collectability is probable.
The Company also provides logistics support and management to some customers, which may include onsite logistics personnel. Revenue is recognized for these services as services are rendered over time and at the time that collectability is probable.
The Company also provides short-term logistics and engineering consulting services to some customers, with fees tied to the completion of contractually defined services. We recognize revenue from these services when we satisfy the performance obligation.
Revenue Disaggregation
The Company operates in one reportable segment and evaluates financial performance on a Company-wide basis. We consider sales disaggregated by end-market to depict how the nature, amount, timing and uncertainty of revenues and cash flows are impacted by changes in economic factors. The following table disaggregates our revenues by major source for the years ended December 31, 2018 and 2017:
Years ended December 31, | ||||||||
| (amounts in thousands) | 2018 | 2017 | ||||||
| Biopharmaceutical | $ | 16,477 | $ | 9,113 | ||||
| Reproductive medicine | 2,173 | 1,706 | ||||||
| Animal health | 976 | 1,135 | ||||||
Total revenues | $ | 19,626 | 11,954 | |||||
Our geographical revenues, by origin, for the years ended December 31, 2018 and 2017, were as follows:
Years Ended December 31, | ||||||||
| (amounts in thousands) | 2018 | 2017 | ||||||
| Americas | $ | 17,877 | $ | 10,638 | ||||
| Europe, the Middle East and Africa (EMEA) | 1,365 | 963 | ||||||
| Asia Pacific (APAC) | 384 | 353 | ||||||
| $ | 19,626 | $ | 11,954 | |||||
Performance Obligations
At contract inception, an assessment of the goods and services promised in the contracts with customers is performed and a performance obligation is identified for each distinct promise to transfer to the customer a good or service (or bundle of goods or services). To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Revenue is recognized when our performance obligation has been met. The Company considers control to have transferred upon delivery because the Company has a present right to payment at that time, the Company has transferred use of the asset, and the customer is able to direct the use of, and obtain substantially all of the remaining benefits from, the asset.
For arrangements under which the Company provides logistics support and management to the customer, the Company satisfies its performance obligations as those services are performed whereby the customer simultaneously receives and consumes the benefits of such services under the agreement.
Revenue generated from short-term logistics and engineering consulting services provided to customers is recognized or when the Company satisfies the contractually defined performance obligations.
Shipping and handling activities related to contracts with customers are accounted for as costs to fulfill our promise to transfer the associated products pursuant to the accounting policy election allowed under Topic 606. Accordingly, the Company records amounts billed for shipping and handling as a component of revenue. Shipping and handling fees and costs are included in cost of revenues in the accompanying consolidated statements of operations.
Revenues are recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
Significant Payment Terms
Pursuant to the Company’s contracts with its customers, amounts billed for services or products delivered by the Company are generally due and payable in full within 15 days from the date of the invoice (except for any amounts disputed by the customer in good faith). Accordingly, the Company determined that its contracts with customers do not include extended payment terms or a significant financing component.
Variable Consideration
In some cases, the nature of the Company’s contracts may give rise to variable consideration, including discounts and allowances or other similar items that generally decrease the transaction price.
Variable consideration is estimated at the most likely amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information (historical, current and forecasted) that is reasonably available.
Revenues are recorded net of variable consideration, such as discounts and allowances.
Warranties
The Company’s products and services are provided on an “as is” basis and no warranties are included in the contracts with customers. Also, the Company does not offer separately priced extended warranty or product maintenance contracts.
Contract Assets
Typically, we invoice the customer and recognize revenue once we have satisfied our performance obligation. Accordingly, our contract assets comprise accounts receivable. Generally, we do not have material amounts of other contract assets since revenue is recognized as control of goods is transferred or as services are performed.
Contract Liabilities (Deferred Revenue)
Contract liabilities are recorded when cash payments are received in advance of the Company’s performance. Deferred revenue was $66,300 and $73,400 at December 31, 2018 and
2017, respectively. During the year ended December 31, 2018, the Company recognized revenues of $73,400 related to contract liabilities outstanding at the beginning of the year.Practical Expedients and Exemptions
We have elected the following practical expedients allowed under Topic 606:
· | Payment terms with our customers, which are one year or less, are not considered a significant financing component. |
· | Shipping and handling fees and costs incurred in connection with products sold are recorded in cost of sales and are not considered a performance obligation to our customers. |
· | Our performance obligations on our orders are generally satisfied within one year from a given reporting date and, therefore, we omit disclosure of the transaction price allocated to remaining performance obligations on open orders. |
· | The Company expenses incremental direct costs of obtaining a contract (sales commissions) when incurred because the amortization period is generally 12 months or less. The Company does not incur costs to fulfill a customer contract that meet the requirements for capitalization. |
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About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.