Revenue

Adoption of ASU 2014-09 (ASC Topic 606), Revenue from Contracts with Customers

On January 1, 2018 we adopted ASC Topic 606 electing the modified retrospective method. We applied the practical expedient permitted under ASC Topic 606 to those contracts which were not completed as of the date of initial adoption. Results for reporting periods after January 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with legacy accounting guidance under ASC Topic 605. The impact of applying ASC Topic 606 was not material, as such we did not record a cumulative adjustment to retained earnings.

Practical expedients and exemptions

Under the practical expedients in ASC Topic 606, we generally expense incentive compensation associated with our internal sales force when incurred because the amortization period is less than one year. These costs are recorded within selling, general and administrative expense.

Disaggregation of Revenue

We sell our durable systems and disposable units through a direct sales force in the United States, Canada and some countries of Europe, and through distribution arrangements in the United States, Canada, Australia, New Zealand, and in some countries of Europe, Asia, Latin America, the Middle East and Africa. During the three months ended September 30, 2018, outside the United States, only Germany generated revenue that represented more than 10% of our total revenue. During the nine months ended September 30, 2018, no individual country, outside the United States, generated revenue that represented more than 10% of our total revenue. We disaggregate our revenue from contracts by major sales channel and geography as we believe they best depict how the nature, amount and timing of revenues and cash flows are affected by economic factors.

Revenues by geographic region

The following table sets forth revenues by our two primary geographical markets, United States and outside of the United States, based on the geographic location to which we deliver the product (in millions):



	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Revenues:
United States	$	202.4	$	537.4
Outside of the United States	64.3		156.2
Total	$	266.7	$	693.6

Revenues by customer sales channel

The following table sets forth revenues disaggregated by customer sales channel (in millions):



	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Revenues:
Distributor	$	154.6	$	431.3
Direct	112.1		262.3
Total	$	266.7	$	693.6

Contract Balances

The timing of revenue recognition, billing and cash collections results in trade receivables and deferred revenue on the consolidated balance sheet. A receivable is recognized in the period our right to the consideration is unconditional. We generally do not have any contracts or performance obligations with a term of more than one year.

Our contracts with customers do not typically include extended payment terms. Payment terms vary by contract type and type of customer and generally range from 30 to 60 days.

Substantially all of our deferred revenue as of September 30, 2018 is associated with an upgrade promotional program related to our G6 system and certain of our free of charge software and mobile applications which will be recognized during 2018. During the three months ended September 30, 2018, we recognized revenue of $5.0 million that was recorded as deferred revenue as of June 30, 2018. During the nine months ended September 30, 2018, we recognized revenue of $1.9 million that was recorded as deferred revenue as of December 31, 2017.