LEMAITRE VASCULAR INCLMAT
LEMAITRE VASCULAR INC Revenue Disclosure
Revenue Recognition
Our revenue is derived primarily from the sale of disposable or implantable devices used during vascular surgery. We sell primarily directly to hospitals and to a lesser extent to distributors, as described below, and, during the periods presented in our consolidated financial statements, entered into consigned inventory arrangements with either hospitals or distributors on a limited basis. With the acquisition of the RestoreFlow allograft business, we also derive revenues from the processing and cryopreservation of human tissues for implantation in patients. These revenues are recognized when services have been provided and the tissue has been shipped to the customer, provided all other revenue recognition criteria discussed in the succeeding paragraph have been met.
On
January
1,
2018
we adopted the provisions of ASU 2014
-09,
Revenue from Contracts with Customers (Topic
. We used the modified retrospective method of adoption under which the comparative information was 606
)not
restated and will continue to be reported under the standard in effect for those periods. The adoption of this standard was not
material to our financial statements and there was no
cumulative effect adjustment to the opening balance of retained earnings required. The core principle of Topic 606
is that an entity should recognize revenue to depict the transfer of 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 standard explains that to achieve the core principle, an entity should take the following actions:Step
1:
Identify the contract with a customerStep
2:
Identify the performance obligations in the contractStep
3:
Determine the transaction priceStep
4:
Allocate the transaction priceStep
5:
Recognize revenue when or as the entity satisfies a performance obligationRevenue is recognized when or as a company satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service). In instances in which shipping and handling activities are performed after a customer takes control of the goods (such as when title passes upon shipment from our dock), we have made the policy election allowed under Topic
606
to account for these activities as fulfillment costs and not
as performance obligations.We generally reference customer purchase orders to determine the existence of a contract. Orders that are
not
accompanied by a purchase order are confirmed with the customer either in writing or verbally. The purchase orders or similar correspondence, once accepted, identify the performance obligations as well as the transaction price, and otherwise outline the rights and obligations of each party. We allocate the transaction price of each contract among the performance obligations in accordance with the pricing of each item specified on the purchase order, which is in turn based on standalone selling prices per our published price lists. In cases where we discount products or provide certain items free of charge, we allocate the discount proportionately to all performance obligations, unless it can be demonstrated that the discount should be allocated entirely to one
or more, but not
all, of the performance obligations.We recognize revenue, net of allowances for returns and discounts, fees paid to group purchasing organizations, and any sales and value added taxes required to be invoiced, which we have elected to exclude from the measurement of the transaction price as allowed by the standard, at the time of shipment (taking into consideration contractual shipping terms), or in the case of consigned inventory, when it is consumed. Shipment is the point at which control of the product and title passes to our customers, and at which LeMaitre Vascular has a present right to receive payment for the goods.
Below is a disaggregation of our revenue by major geographic area, which is among the primary categorizations used by management in evaluating financial performance, for the periods indicated (in thousands):
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
| Americas | $ | 63,649 | $ | 62,696 | ||||
| Europe, Middle East and Africa | 35,319 | 32,517 | ||||||
| Asia/Pacific Rim | 6,600 | 5,654 | ||||||
| Total | $ | 105,568 | $ | 100,867 | ||||
Except as discussed in Note
6,
we do not
carry any contract assets or contract liabilities, as there are generally no
unbilled amounts due from customers under contracts for which we have partially satisfied performance obligations, or amounts received from customers for which we have not
satisfied performance obligations. We satisfy our performance obligations under revenue contracts within a very short time period from receipt of the orders, and payments from customers are typically received within 30
to 60
days of fulfillment of the orders, except in certain geographies such as Spain and Italy where the payment cycle is customarily longer. Accordingly, there is no
significant financing component to our revenue contracts. Additionally, we have elected as a policy that incremental costs (such as commissions) incurred to obtain contracts are expensed as incurred, due to the short-term nature of the contracts.Customers returning products
may
be entitled to full or partial credit based on the condition and timing of the return. To be accepted, a returned product must be unopened (if sterile), unadulterated, and undamaged, must have at least 18
months remaining prior to its expiration date, or twelve
months for our hospital customers in Europe, and generally be returned within 30
days of shipment. These return policies apply to sales to both hospitals and distributors. The amount of products returned to us, either for exchange or credit, has not
been material. Nevertheless, we provide for an allowance for future sales returns based on historical return experience, which requires judgment. Our cost of replacing defective products has not
been material and is accounted for at the time of replacement.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.