Revenue | Note 9 – Revenue The Company’s revenues are generated primarily from the sale of manufactured products built to customer specifications. The Company also generates revenue from design, development and engineering services, in addition to the sale of other inventory. Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a manufactured product to a customer. The Company’s contracts with customers are generally short-term in nature. The Company applies the optional exemption related to short-term performance obligations and does not disclose information about remaining performance obligations that have original expected durations of one year or less. Customers are generally billed when the product is shipped or as services are performed. Under the majority of the Company’s manufacturing contracts with customers, the customer controls all of the work-in-progress as products are being built. Revenues under these contracts are recognized progressively based on the cost-to-cost method. For other manufacturing contracts, the customer does not take control of the product until it is completed. Under these contracts, the Company recognizes revenue upon transfer of control of the product to the customer. Revenue from design, development and engineering services is recognized over time as the services are performed. The Company assumes no significant obligations after shipment as it typically warrants workmanship only. Therefore, the warranty provisions are generally not significant. If the Company records revenue, but does not issue an invoice, a contract asset is recognized. The contract asset is transferred to accounts receivable when the entitlement to payment becomes unconditional. Taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of sales. Disaggregation of revenue In the following tables, revenue is disaggregated by market sector. The tables also include a reconciliation of the disaggregated revenue with the reportable operating segments. Reportable Operating Segments Three Months Ended June 30, 2021 (in thousands) Americas Asia Europe Total Market Sector: Industrials $ 20,358 $ 61,115 $ 18,433 $ 99,906 A&D 91,427 73 5,180 96,680 Medical 47,920 50,386 10,599 108,905 Semi-Cap 55,492 66,781 16,931 139,204 Computing 32,766 6,832 — 39,598 Telecommunications 32,007 28,222 140 60,369 External revenue 279,970 213,409 51,283 544,662 Elimination of intersegment sales 12,300 9,130 337 21,767 Segment revenue $ 292,270 $ 222,539 $ 51,620 $ 566,429 Six Months Ended June 30, 2021 (in thousands) Americas Asia Europe Total Market Sector: Industrials $ 41,354 $ 116,525 $ 37,479 $ 195,358 A&D 174,914 73 11,074 186,061 Medical 95,344 91,170 30,581 217,095 Semi-Cap 104,358 115,542 32,414 252,314 Computing 68,104 15,180 — 83,284 Telecommunications 61,965 53,941 365 116,271 External revenue 546,039 392,431 111,913 1,050,383 Elimination of intersegment sales 23,069 18,412 587 42,068 Segment revenue $ 569,108 $ 410,843 $ 112,500 $ 1,092,451 Reportable Operating Segments Three Months Ended June 30, 2020 (in thousands) Americas Asia Europe Total Market Sector: Industrials $ 24,298 $ 49,379 $ 13,453 $ 87,130 A&D 80,939 — 7,585 88,524 Medical 72,434 55,890 6,427 134,751 Semi-Cap 37,321 37,151 12,379 86,851 Computing 35,487 8,366 — 43,853 Telecommunications 21,020 28,789 48 49,857 External revenue 271,499 179,575 39,892 490,966 Elimination of intersegment sales 17,301 8,804 332 26,437 Segment revenue $ 288,800 $ 188,379 $ 40,224 $ 517,403 Six Months Ended June 30, 2020 (in thousands) Americas Asia Europe Total Market Sector: Industrials $ 58,243 $ 97,604 $ 34,109 $ 189,956 A&D 193,951 — 13,773 207,724 Medical 141,813 100,093 10,821 252,727 Semi-Cap 67,770 74,443 27,358 169,571 Computing 65,561 14,893 — 80,454 Telecommunications 47,669 57,448 381 105,498 External revenue 575,007 344,481 86,442 1,005,930 Elimination of intersegment sales 28,189 15,507 782 44,478 Segment revenue $ 603,196 $ 359,988 $ 87,224 $ 1,050,408 During both the six months ended June 30, 2021 and 2020, 90 % of the Company’s revenue was recognized as products and services that were transferred over time. The timing of revenue recognition, billings and cash collections result in billed accounts receivable, contract assets and advance payments from customers. As of June 30, 2021 and December 31, 2020, the Company had $ 154.6 million and $ 142.8 million, respectively, in contract assets from contracts with customers. The contract assets primarily relate to the Company’s right to consideration for work completed but not billed at the reporting date. The contract assets are transferred to accounts receivable when the rights become unconditional. Significant changes in the contract asset balance during the period are as follows: Six Months Ended (in thousands) 2021 2020 Beginning balance as of December 31 $ 142,779 $ 161,061 Revenue recognized 944,052 915,600 Amounts collected or invoiced ( 932,202 ) ( 923,020 ) Ending balance as of June 30 $ 154,629 $ 153,641 As of June 30, 2021 and December 31, 2020, the Company had $ 88.7 million and $ 84.1 million, respectively, in advance payments from customers. Of those amounts, $ 55.6 million and $ 54.9 million, respectively, were customer deposits and prepayments of inventory and $ 33.1 million and $ 29.2 million, respectively, were related to the contractual timing of payments. The advance payments are not considered a significant financing component because they are used to meet working capital demands of a contract, offset inventory risks and protect the Company from the failure of other parties to fulfill obligations under a contract. |