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ClearPoint Issues New Revenue Reversal Warning

Medical device firm details new ways it recognizes revenue before warning of future reversals.

April 1, 2024

ClearPoint Neuro (CLPT), a maker of medical devices that perform minimally invasive surgical procedures in the brain and heart, inserted new language in its latest annual report that seemingly highlights new ways the company can recognize revenue.

In evaluating the transfer of control of a product or service to a customer, ClearPoint revealed it employs multiple methods:

“...we may use output methods, such as time elapsed, or input methods, such as labor hours expended or costs incurred, to measure our progress toward complete satisfaction of the performance obligation.”

Later, ClearPoint added new language regarding milestone payments to which it’s entitled should customers achieve specified developments or regulatory approvals. Here, ClearPoint seemingly assures investors revenue is recognized only when it’s sure a milestone will be reached and

“...a significant future reversal of cumulative revenue under the contract will not occur.”

However, the next sentence, in our view, sows doubt in ClearPoint’s assurance:

“At the end of each reporting period, we re-evaluate the probability of achievement of such milestones, and if necessary adjust our estimate of the overall transaction price.”

ClearPoint then reiterated its warning that a revenue reversal is possible should a milestone it previously deemed probable will not occur.

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