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Revenue

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue

NOTE 17—REVENUE

The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes: (1) identifying contracts with customers, (2) identifying performance obligations within those contracts, (3) determining the transaction price, (4) allocating the transaction price to the performance obligation in the contract, which may include an estimate of variable consideration, and (5) recognizing revenue when or as each performance obligation is satisfied.

Sales of OmniMetrix monitoring systems include the sale of hardware (“HW”) and of monitoring services (“Monitoring”). Sales of OmniMetrix equipment do not qualify as a separate unit of accounting. As a result, revenue (and related costs) associated with sale of equipment are recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring units. Revenue and related costs with respect to the sale of equipment are recognized over the estimated life of the units which are currently estimated to be three years (two years up to December 31, 2017). Revenues from the prepayment of monitoring fees (generally paid twelve months in advance) are initially recorded as deferred revenue upon receipt of payment from the customer and then amortized to revenue over the monitoring service period.

The following table disaggregates the Company’s revenue for the years ended December 31, 2018 and 2017:

		HW				Monitoring				Total
Year ended December 31, 2018:
PG Segment		$	1,152			$	2,504			$	3,656
CP Segment			1,223				208				1,431
Total Revenue		$	2,375			$	2,712			$	5,087

		HW				Monitoring				Total
Year ended December 31, 2017:
PG Segment		$	1,228			$	2,127			$	3,355
CP Segment			887				108				995
Total Revenue		$	2,115			$	2,235			$	4,350

Deferred revenue activity for the year ended December 31, 2018 can be seen in the table below:

		HW				Monitoring				Total
Balance at December 31, 2017		$	2,227			$	1,337			$	3,564
Additions during the period			2,374				3,004				5,378
Recognized as revenue			(2,169	)			(2,712	)			(4,881	)
Balance at December 31, 2018			2,432				1,629			$	4,061

Amounts to be recognized as revenue in the year ending:
December 31, 2019			1,353				1,379				2,732
December 31, 2020			731				244				975
December 31, 2021 and thereafter			348				6				354
		$	2,432			$	1,629			$	4,061

Other revenue of approximately $206 is related to accessories, repairs, and other miscellaneous charges that are recognized to revenue when sold and are not deferred.

Deferred revenue activity for the year ended December 31, 2017 can be seen in the table below:

		HW				Monitoring				Total
Balance at December 31, 2016		$	1,655			$	1,123			$	2,778
Additions during the period			2,512				2,447				4,959
Recognized as revenue			(1,940	)			(2,233	)			(4,173	)
Balance at December 31, 2017			2,227				1,337			$	3,564

Amounts to be recognized as revenue in the year ending:
December 31, 2018			1,603				1,150				2,753
December 31, 2019			624				181				805
December 31, 2020 and thereafter			―				6				6
		$	2,227			$	1,337			$	3,564

Other revenue of approximately $177 is related to accessories, repairs, and other miscellaneous charges that are recognized to revenue when sold and are not deferred.

Deferred charges relate only to the sale of equipment. Deferred charges activity for the year ended December 31, 2018 can be seen in the table below:

Balance at December 31, 2017		$	1,374
Additions during the period			1,462
Recognized as cost of sales			(1,398	)
Balance at December 31, 2018		$	1,438

Amounts to be recognized as cost of sales in the year ending:
December 31, 2019		$	803
December 31, 2020			428	*
December 31, 2021 and thereafter			207	*
		$	1,438

* Amounts included in Other Assets in the Company’s Consolidated Balance Sheets at December 31, 2018.

Data costs (COGS) for monitoring services of approximately $445 and the COGS for the miscellaneous revenue from sales of accessories and repairs of approximately $123 are expensed as incurred and are not deferred.

Deferred charges relate only to the sale of equipment. Deferred charges activity for the year ended December 31, 2017 can be seen in the table below:

Balance at December 31, 2016		$	1,134
Additions during the period			1,672
Recognized as cost of sales			(1,432	)
Balance at December 31, 2017		$	1,374

Amounts to be recognized as cost of sales in the year ending:
December 31, 2018		$	999
December 31, 2019			375	*
December 31, 2020 and thereafter			―
		$	1,374

* Amounts included in Other Assets in the Company’s Consolidated Balance Sheets at December 31, 2018.

Data costs (COGS) for monitoring services of approximately $364 and the COGS for the miscellaneous revenue from sales of accessories and repairs of approximately $107 are expensed as incurred and are not deferred.

The Company pays its employees sales commissions for sales of HW and for first sales of monitoring services (not for renewals). In accordance with Topic 606, Revenue from Contracts with Customers, of the FASB Accounting Standards Codification (“ASC 606”), the Company capitalizes as a contract asset the sales commissions on these sales. Contract assets associated with HW are amortized over the estimated life of the units which are currently estimated to be three years (two years up to December 31, 2017). Contract assets associated with monitoring services are amortized over the expected monitoring life including renewals. The contract asset balance at December 31, 2017 of $152 has been recorded as an adjustment to retained earnings in adopting ASC 606 under the modified retrospective method.

The following table provides a reconciliation of the Company’s sales commissions contract assets for the year ended December 31, 2018:

		HW				Monitoring				Total
Balance at December 31, 2017		$	125			$	27			$	152
Additions during the period			91				21				112
Amortization of sales commissions			(109	)			(12	)			(121	)
Balance at December 31, 2018		$	107			$	36			$	143

The capitalized sales commissions are included in Other Current Assets ($76) and Other Assets ($67) in the Company’s Consolidated Balance Sheets at December 31, 2018.