Note 2. Revenues

Revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price. Estimates of variable consideration primarily relate to capped installment payment arrangements with third‑party payers and patient responsibility amounts, including deductibles, coinsurance, copayments, and similar amounts. Estimating variable consideration requires significant judgement, including selecting estimation methodologies, evaluating historical payment experience, and assessing factors that may affect future collections. Electromed estimates variable consideration using the expected value method, as it best predicts the amount of consideration to which Electromed expects to be entitled, given the large number of contracts with similar characteristics and a wide range of possible outcomes. In applying this method, management considers quantitative inputs such as historical claims approval rates, payment timing and recovery patterns, historical termination experience, and patient demographic data, as well as qualitative factors including changes in insurance coverage, mortality, patient utilization patterns, and other relevant circumstances.

Capped installment payment arrangements represent the majority of Electromed’s variable consideration. For the periods presented, amounts subject to capped installment payment arrangements represented a significant portion of net revenues, accounting for approximately 96% of net revenues in the homecare market. Electromed’s estimates of consideration related to these arrangements are based on historical payment and termination patterns and are subject to contractual caps that limit the total consideration to which Electromed may be entitled.

When a contract with a customer has been established, revenue is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer, typically upon shipment or delivery. 

Disaggregation of revenues. In the following table, net revenues are disaggregated by market:

In the following table, net homecare revenue is disaggregated by payer type:

Contract balances. The following tables provide information about accounts receivable and contract assets from contracts with customers:

Total Accounts receivable, net of allowances for credit losses, as of June 30, 2024, were $23,333,000. Accounts receivable outstanding for greater than one year totaled $473,000 and $430,000 as of March 31, 2026, and June 30, 2025, respectively. Our accounts receivable balance contains amounts due from governmental and other third-party payers, including Medicare. Under certain payer programs, cash collection occurs through interim payments and final settlement over a period greater than one year, generally approximating thirteen months. The Company has determined that this collection period represents its normal operating cycle. In accordance with ASC 210‑10‑45, the Company classifies these receivables as current assets.