Stereotaxis, Inc. Revenue Disclosure

Revenue and Costs of Revenue

 

Revenue Recognition

 

The Company accounts for revenue in accordance with Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers.

 

We generate revenue from initial capital sales of systems as well as recurring revenue from the sale of our proprietary disposable devices, from royalties paid to the Company on the sale of various devices as provided by co-development and co-placement arrangements, and from revenue including ongoing software updates and service contracts.

 

We account for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. We record our revenue based on consideration specified in the contract with each customer, net of any taxes collected from customers that are remitted to government authorities.

 

For contracts containing multiple products and services the Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundled package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company recognizes revenues as the performance obligations are satisfied by transferring control of the product or service to a customer.

 

For arrangements with multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services and market conditions. The Company regularly reviews standalone selling prices and updates these estimates if necessary.

 

Our revenue recognition policy affects the following revenue streams in our business as follows:

 

	Systems:
	Contracts related to the sale of systems typically contain separate obligations for the delivery of system(s), installation, service-type warranty, and an implied obligation to provide software enhancements if and when available for one year following installation. Revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. Revenue from service-type warranties and the implied obligation to deliver software enhancements if and when available is included in Other Recurring Revenue and is recognized ratably typically over the first year following installation of the system as the customer receives the service-type warranty and right to software updates throughout the period. The Company’s system contracts generally do not provide a right of return. Systems may be covered by a one-year assurance-type warranty in lieu of a service-type warranty. Assurance-type warranty costs were less than $0.1 million and $0.5 million for the years ended December 31, 2024 and 2023, respectively. Revenue from system delivery and installation represented 32% and 33% of revenue for the years ended December 31, 2024 and 2023, respectively.
	Disposables:
	Revenue from sales of disposable products is recognized when control is transferred to the customers, which generally occurs at the time of shipment, but can also occur at the time of delivery depending on the customer arrangement. Disposable products are covered by an assurance-type warranty that provides for the return of defective products. Warranty costs were not material for the periods presented. Disposable revenue represented 30% and 24% of revenue for the years ended December 31, 2024 and 2023, respectively.

 

 

	Royalty:
	The Company receives royalties on the sale of various devices as provided by co-development and co-placement arrangements with various manufacturers. Royalty revenue represented less than 1% of revenue for the years ended December 31, 2024 and 2023.

 

	Other Recurring Revenue:
	Other recurring revenue includes revenue from product maintenance plans, service-type warranties, other post warranty maintenance, and the implied obligation to provide software enhancements if and when available for a specified period, typically one year following installation of our systems. Revenue from services and software enhancements is deferred and amortized over the service or update period, which is typically one year. Revenue related to services performed on a time-and-materials basis is recognized when performed. Other recurring revenue represented 38% and 43% of revenue for the years ended December 31, 2024 and 2023, respectively.

 

The following table summarizes the Company’s revenue for systems and disposables, service and accessories for the years ended December 31, 2024 and 2023 (in thousands):

 Schedule of Revenue Disaggregated by Type

		2024				2023
		Year Ended December 31,
		2024				2023
Systems		$	8,632			$	8,739
Disposables, service and accessories			18,286				18,032
Total revenue		$	26,918			$	26,771

 

Transaction price allocated to remaining performance obligations relates to amounts allocated to products and services for which the revenue has not yet been recognized. A significant portion of this amount relates to the Company’s systems contracts and obligations that will be recognized as revenue in future periods. These obligations are generally satisfied within two years after contract inception but may occasionally extend longer. Transaction price representing revenue to be earned on remaining performance obligations on system contracts was approximately $15.2 million as of December 31, 2024. Performance obligations arising from contracts for disposables and service are generally expected to be satisfied within one year after entering into the contract.

 

The following information summarizes the Company’s contract assets and liabilities (in thousands):

 Summary of Contract Assets and Liabilities

		December 31, 2024				December 31, 2023
Contract Assets - unbilled receivables		$	90			$	72
Customer deposits		$	2,687			$	2,105
Product shipped, revenue deferred			1,708				1,413
Deferred service and license fees			4,473				4,776
Total deferred revenue		$	8,868			$	8,294
Less: Long-term deferred revenue			(2,064	)			(1,637	)
Total current deferred revenue		$	6,804			$	6,657

 

The Company invoices its customers based on the billing schedules in its sales arrangements. Contract assets primarily represent the difference between the revenue that was earned but not billed on service contracts and revenue from system contracts that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Customer deposits primarily relate to future system sales but can also include deposits on disposable sales. Deferred revenue is primarily related to service contracts, for which the service fees are billed up-front, generally quarterly or annually, and for amounts billed in advance for system contracts for which some performance obligations remain outstanding. For service contracts, the associated deferred revenue is generally recognized ratably over the service period. For system contracts, the associated deferred revenue is recognized when the remaining performance obligations are satisfied. The Company did not have any impairment losses on its contract assets for the periods presented.

 

Revenue recognized for the years ended December 31, 2024 and 2023, that was included in the deferred revenue balance at the beginning of each reporting period was $5.5 million and $6.1 million, respectively.