| Revenue from Contracts with Customers | REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue Recognition Under ASC 606, Revenue from Contracts with Customers , revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the 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 revenue when (or as) the entity satisfies a performance obligation. The Company has one primary revenue stream which is the sales of its products. Disaggregation of Revenue The following table summarizes net sales by Global Business Unit ("GBU") and geography: Three Months Ended Nov 30, 2021 Three Months Ended Nov 30, 2020 (in thousands) United States International Total United States International Total Net sales Endovascular Therapies $ 36,253 $ 3,407 $ 39,660 $ 30,689 $ 3,211 $ 33,900 Vascular Access 20,705 4,365 25,070 20,161 3,769 23,930 Oncology 8,392 5,158 13,550 9,834 5,106 14,940 Total $ 65,350 $ 12,930 $ 78,280 $ 60,684 $ 12,086 $ 72,770 Six Months Ended Nov 30, 2021 Six Months Ended Nov 30, 2020 (in thousands) United States International Total United States International Total Net sales Endovascular Therapies $ 71,006 $ 6,712 $ 77,718 $ 57,669 $ 6,088 $ 63,757 Vascular Access 41,180 8,846 50,026 39,383 12,652 52,035 Oncology 17,628 9,879 27,507 17,740 9,454 27,194 Total $ 129,814 $ 25,437 $ 155,251 $ 114,792 $ 28,194 $ 142,986 As the Company has previously announced, the Company is focused on its ongoing transformation from a company with a broad portfolio of largely undifferentiated products to a more focused medical technology company that delivers unique and innovative health care solutions. The Company believes that this transformation will enable the Company to shift the portfolio from the mature, lower-growth markets where we have competed in the past by investing in technology and products that provide access to larger and faster growing markets. As such, we believe the growth in the near to mid-term will be driven by our high technology products including Auryon, Thrombectomy (which includes AngioVac, AlphaVac and thrombolytics) and NanoKnife. We will refer to these high technology products as our Med Tech business and we will refer to the remainder of the portfolio as our Med Device business. The following table summarizes net sales by Med Tech and Med Device: Three Months Ended Six Months Ended (in thousands) Nov 30, 2021 Nov 30, 2020 Nov 30, 2021 Nov 30, 2020 Net Sales Med Tech $ 18,886 $ 13,849 $ 36,504 $ 24,335 Med Device 59,394 58,921 118,747 118,651 Total $ 78,280 $ 72,770 $ 155,251 $ 142,986 Net Product Revenue The Company's products consist of a wide range of medical, surgical and diagnostic devices used by professional healthcare providers for vascular access, for the treatment of peripheral vascular disease and for use in oncology and surgical settings. The Company's devices are generally used in minimally invasive, image-guided procedures. Most of the Company's products are intended to be used once and then discarded, or they may be implanted for short or long term use. The Company sells its products to its distributors and to end users, such as interventional radiologists, interventional cardiologists, vascular surgeons, urologists, interventional and surgical oncologists and critical care nurses. Contracts and Performance Obligations The Company contracts with its customers based on customer purchase orders, which in many cases are governed by master purchasing agreements. The Company’s contracts with customers are generally for product only, and do not include other performance obligations such as services or other material rights. As part of its assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. Transaction Price and Allocation to Performance Obligations Transaction prices of products are typically based on contracted rates. Product revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer, net of any variable consideration as described below. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products underlying each performance obligation. The Company has standard pricing for its products and determines standalone selling prices based on the price at which the performance obligation is sold separately. Revenue Recognition Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which occurs at a point in time, and may be upon shipment from the Company’s manufacturing site or delivery to the customer’s named location, based on the contractual shipping terms of a contract. In determining whether control has transferred, the Company considers if there is a present right to payment from the customer and when physical possession, legal title and risks and rewards of ownership have transferred to the customer. The Company typically invoices customers upon satisfaction of identified performance obligations. As the Company’s standard payment terms are 30 to 90 days from invoicing, the Company does not provide any significant financing to its customers. The Company enters into agreements to place placement and evaluation units (“units”) at customer sites, but the Company retains title to the units. During the duration of these agreements the customer has the right to use the unit at no upfront charge in connection with the customer’s ongoing purchase of disposables. These types of agreements include an embedded operating lease for the right to use the units. In these arrangements, revenue recognized for the sale of the disposables is not allocated between the disposal revenue and lease revenue due to the insignificant value of the units in relation to the total agreement value. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue. Variable Consideration Reserves: Revenue from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established for discounts, returns, rebates and allowances that are offered within contracts between the Company and its customers. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as a contra asset. Rebates and Allowances: The Company provides certain customers with rebates and allowances that are explicitly stated in the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. The Company establishes reserves for such amounts, which is included in accrued expenses in the accompanying Consolidated Balance Sheets. These rebates and allowances result from performance-based offers that are primarily based on attaining contractually specified sales volumes. The Company is also required to pay administrative fees to group purchasing organizations. Product Returns: The Company generally offers customers a limited right of return. Product returns after 30 days must be pre-approved by the Company and customers may be subject to a 20% restocking charge. To be accepted, a returned product must be unadulterated, undamaged and have at least twelve months remaining prior to its expiration date. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using its historical product return information and considers other factors that it believes could significantly impact its expected returns, including product recalls. During the six months ended November 30, 2021, such product returns were not material. Contract Balances with Customers A receivable is generally recognized in the period the Company ships the product. Payment terms on invoiced amounts are based on contractual terms with each customer and generally coincide with revenue recognition. Accordingly, the Company does not have any contract assets associated with the future right to invoice its customers. In some cases, if control of the product has not yet transferred to the customer or the timing of the payments made by the customer precedes the Company’s fulfillment of the performance obligation, the Company recognizes a contract liability that is included in deferred revenue in the accompanying Consolidated Balance Sheets. The following table presents changes in the Company’s receivables, contract assets and contract liabilities with customers: (in thousands) Nov 30, 2021 May 31, 2021 Receivables $ 38,205 $ 35,405 Contract assets $ — $ — Contract liabilities $ 690 $ 426 During the six months ended November 30, 2021, the Company had additions to contract liabilities of $0.8 million. This was offset by $0.5 million in revenue that was recognized during the six months ended November 30, 2021. Costs to Obtain or Fulfill a Customer Contract Under ASC 606, the Company may recognize an asset for incremental costs of obtaining a contract with a customer if it expects to recover those costs. The Company’s sales incentive compensation plans qualify for capitalization since these plans are directly related to sales achieved during a period of time. However, the Company has elected the practical expedient under ASC 340-40-25-4 to expense the costs as they are incurred within selling and marketing expenses since the amortization period is less than one year. |
