Effective on January 1, 2018, the Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (Topic 606). The standard establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows from a contract with a customer.

During the year ended December 31, 2019, the Company entered into a transaction with one of its customers for emitters involving elements of variable consideration. Due to the escalation in trade policy tension between the governments of China and the United States, the customer required a larger than normal shipment of emitters having a right to return them through March 15, 2020 in order to accommodate their uncertain production needs. Per Topic 606, the Company was constrained to recognizing revenue on this unique shipment to the extent that it was probable that a significant revenue reversal would not occur and deferred recognition of the remainder until after the inherent uncertainties of the transaction were resolved. These uncertainties include factors that are outside of the Company’s influence, including the customer’s production needs and complexities associated with the current international health and trade issues in China.

For the years ended December 31, 2019, 2018 and 2017, the Company recorded 97%, 95% and 97%, respectively, of its revenue from sales of material and 3%, 5% and 3%, respectively, from the providing of services through Adesis.

The following table provides information about assets and liabilities associated with our contracts from customers (in thousands):

Short-term and long-term unbilled receivables are classified as other current assets and other assets, respectively, on the Consolidated Balance Sheets. The deferred revenue balance at December 31, 2019 will be recognized as materials are shipped to customers over the remaining contract periods. The significant customer contracts (individually representing greater than 10% of revenue) expire in 2022. As of December 31, 2019, the Company had $6.5 million of backlog associated with committed purchase orders from its customers for phosphorescent emitter material. These orders are anticipated to be fulfilled within the next 90 days.

Significant changes in the unbilled receivables and deferred liabilities balances for the years ended December 31, 2019 and 2018, are as follows (in thousands):

	Year Ended December 31, 2019
	Unbilled Receivables Increase (Decrease)			Deferred Revenue (Increase) Decrease
Balance at December 31, 2018	$	1,020		$	(122,567	)
Revenue recognized that was previously included in deferred revenue		—			133,394
Increases due to cash received		—			(157,321	)
Cumulative catch-up adjustment arising from changes in estimates of transaction price		—			1,632
Unbilled receivables recognized		1,834			—
Transferred to receivables from unbilled receivables		(1,492	)		—
Net change		342			(22,295	)
Balance at December 31, 2019	$	1,362		$	(144,862	)

	Year Ended December 31, 2018
	Unbilled Receivables Increase (Decrease)			Deferred Revenue (Increase) Decrease
Balance at December 31, 2017	$	70		$	(38,883	)
Adoption of Topic 606 on January 1, 2018		307			(21,307	)
Adjusted balance on January 1, 2018		377			(60,190	)
Revenue recognized that was previously included in deferred revenue		—			64,562
Increases due to cash received		—			(130,639	)
Cumulative catch-up adjustment arising from changes in estimates of transaction price		—			3,700
Unbilled receivables recognized		2,024			—
Transferred to receivables from unbilled receivables		(1,381	)		—
Net change		643			(62,377	)
Balance at December 31, 2018	$	1,020		$	(122,567	)

The Company adopted Topic 606 beginning January 1, 2018 using the “modified retrospective” approach, meaning the standard was applied only to the most current period presented in the financial statements, with a cumulative adjustment to retained earnings. Under this transition method, the Company elected to apply Topic 606 only to contracts that were not complete at the initial adoption date. Adoption of the new standard resulted in a reduction of retained earnings of $17.1 million on January 1, 2018.

The new standard impacts how the Company recognizes revenue on its commercial license and material supply agreements with customers. Previously, the Company recognized license fees on a straight-line basis or as received from the customer, and royalty revenue one quarter in arrears based on sales information received from its customers typically received after disclosing that quarter’s results. Under the new standard, total contract consideration is estimated and recognized over the contract term based on material units sold at its estimated per unit fee. Total contract consideration includes fixed amounts designated in contracts with customers as license fees as well as estimates of material fees and royalties to be earned.

Prior to the adoption of Topic 606 on January 1, 2018, the Company recognized revenue in accordance with ASC Topic 605, Revenue Recognition (Topic 605). The impact of Topic 606 on revenue for the years ended December 31, 2018, was a decrease of $78.9 million, respectively, from the amount that would have been reported under Topic 605.

The following tables summarize the impacts of adopting Topic 606 on the Company’s Consolidated Financial Statements for the year ended December 31, 2018 (in thousands)

	Impact of Changes in Accounting Policies
December 31, 2018	As Reported		Adjustment			Balances Without Adoption of Topic 606
ASSETS
Other assets (current and non-current)	$	70,892	$	—		$	70,892
Deferred income taxes		24,377		(11,153	)		13,224
TOTAL ASSETS		933,424		(11,153	)		922,271

LIABILITIES AND SHAREHOLDERS' EQUITY
Deferred revenue (current and non-current)		122,567		(99,885	)		22,682
Retained earnings		129,552		88,732			218,284
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		933,424		(11,153	)		922,271

	Impact of Changes in Accounting Policies
Year Ended December 31, 2018	As Reported			Adjustment			Balances Without Adoption of Topic 606
REVENUE	$	247,414		$	78,885		$	326,299
Gross margin		193,873			78,885			272,758
OPERATING INCOME		56,735			78,885			135,620
INCOME BEFORE INCOME TAXES		64,311			78,885			143,196
INCOME TAX EXPENSE		(5,471	)		(7,252	)		(12,723	)
NET INCOME		58,840			71,633			130,473

	Impact of Changes in Accounting Policies
Year Ended December 31, 2018	As Reported			Adjustment			Balances Without Adoption of Topic 606
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	58,840		$	71,633		$	130,473
Amortization of deferred revenue and recognition of unbilled receivables		(68,905	)		(81,991	)		(150,896	)
Deferred income tax (benefit) expense		(12,814	)		10,358			(2,456	)
Other assets (current and non-current)		(59,062	)		—			(59,062	)
Net cash provided by operating activities		121,796			—			121,796