Ameresco, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Revenue from Contracts with Customers

Revenue from Contracts with Customers

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following table provides information about disaggregated revenue by line of business, reportable segments, and geographical region for the three and six months ended June 30, 2019 and 2018.



	US Regions		U.S. Federal		Canada		Non-Solar DG			All Other		Total
Line of Business
Three Months Ended June 30, 2019
Project revenue	$	77,913	$	44,402	$	5,498	$	2,185		$	3,159	$	133,157
O&M revenue	3,982		9,389		5		2,406			21		15,803
Energy assets	5,343		976		938		18,492			280		26,029
Other	982		255		1,442		182			20,333		23,194
Total revenues	$	88,220	$	55,022	$	7,883	$	23,265		$	23,793	$	198,183
Three months ended June 30, 2018
Project revenue	$	80,877	$	47,437	$	5,317	$	1,201		$	4,200	$	139,032
O&M revenue	4,069		9,566		—		2,258			—		15,893
Energy assets	3,799		1,140		1,017		16,501			335		22,792
Other	33		71		1,624		(39		)	17,576		19,265
Total revenues	$	88,778	$	58,214	$	7,958	$	19,921		$	22,111	$	196,982
Six Months Ended June 30, 2019
Project revenue	$	123,617	$	76,755	$	10,732	$	3,259		$	6,226	$	220,589
O&M revenue	7,300		19,247		5		4,441			21		31,014
Energy assets	11,364		1,619		1,258		36,191			582		51,014
Other	1,536		458		3,036		604			40,044		45,678
Total revenues	$	143,817	$	98,079	$	15,031	$	44,495		$	46,873	$	348,295
Six Months Ended June 30, 2018
Project revenue	$	146,317	$	85,275	$	12,253	$	2,100		$	4,770	$	250,715
O&M revenue	7,964		18,744		19		4,254			—		30,981
Energy assets	8,780		1,909		1,383		31,615			599		44,286
Other	408		71		3,207		69			34,655		38,410
Total revenues	$	163,469	$	105,999	$	16,862	$	38,038		$	40,024	$	364,392



	US Regions		U.S. Federal		Canada		Non-Solar DG		All Other		Total
Geographical Regions
Three Months Ended June 30, 2019
United States	$	88,220	$	55,022	$	556	$	23,265	$	19,469	$	186,532
Canada	—		—		7,327		—		42		7,369
Other	—		—		—		—		4,282		4,282
Total revenues	$	88,220	$	55,022	$	7,883	$	23,265	$	23,793	$	198,183
Three Months Ended June 30, 2018
United States	$	88,778	$	58,214	$	648	$	19,921	$	17,543	$	185,104
Canada	—		—		7,310		—		173		7,483
Other	—		—		—		—		4,395		4,395
Total revenues	$	88,778	$	58,214	$	7,958	$	19,921	$	22,111	$	196,982
Six Months Ended June 30, 2019
United States	$	143,817	$	98,079	$	1,258	$	44,495	$	38,116	$	325,765
Canada	—		—		13,773		—		107		13,880
Other	—		—		—		—		8,650		8,650
Total revenues	$	143,817	$	98,079	$	15,031	$	44,495	$	46,873	$	348,295
Six Months Ended June 30, 2018
United States	$	163,469	$	105,999	$	1,168	$	38,038	$	33,891	$	342,565
Canada	—		—		15,694		—		228		15,922
Other	—		—		—		—		5,905		5,905
Total revenues	$	163,469	$	105,999	$	16,862	$	38,038	$	40,024	$	364,392

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:



	June 30, 2019		December 31, 2018
Accounts receivable, net	$	109,332	$	85,985
Accounts receivable retainage, net	15,383		13,516
Contract Assets:
Costs and estimated earnings in excess of billings	120,686		86,842
Contract Liabilities:
Billings in excess of cost and estimated earnings	30,209		30,706



	June 30, 2018		January 1, 2018
Accounts receivable, net	$	115,596	$	85,121
Accounts receivable retainage, net	14,669		17,484
Contract Assets:
Costs and estimated earnings in excess of billings	64,656		95,658
Contract Liabilities:
Billings in excess of cost and estimated earnings	27,254		27,248

Accounts receivable retainage represents amounts due from customers, but where payments are withheld contractually until certain construction milestones are met. Amounts retained typically range from 5% to 10% of the total invoice. The Company classifies as a current asset those retainages that are expected to be billed in the next twelve months. Unbilled revenue, presented as costs and estimated earnings in excess of billings, represent amounts earned and billable that were not invoiced at the end of the fiscal period.

Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. The Company’s rights to consideration are generally unconditional at the time its performance obligations are satisfied.

At the inception of a contract, the Company expects the period between when it satisfies its performance obligations, and when the customer pays for the services, will be one year or less. As such, the Company has elected to apply the practical expedient which allows the Company to not adjust the promised amount of consideration for the effects of a significant financing component, when a financing component is present.

When the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. Such deferred revenue typically results from billings in excess of costs incurred and advance payments received on project contracts. As of June 30, 2019 and December 31, 2018, the Company classified $5,829 and $6,343, respectively, as a non-current liability, included in other liabilities on the condensed consolidated balance sheets, for those performance obligations expected to be completed beyond the next twelve months.

The increase in contract assets for the six months ended June 30, 2019 was primarily due to revenue recognized of approximately $220,062, offset in part by billings of approximately $201,908. The decrease in contract liabilities was primarily driven by recognition of revenue as performance obligations were satisfied exceeding increases from the receipt of advance payments from customers, and related billings. For the six months ended June 30, 2019, the Company recognized revenue of $38,854, and billed customers $35,172, that was previously included in the beginning balance of contract liabilities. Changes in contract liabilities are also driven by reclassifications to or from contract assets as a result of timing of customer payments.

The decrease in contract assets for the six months ended June 30, 2018 was primarily due to billings of approximately $285,321, offset in part by revenue recognized of $236,327. The increase in contract liabilities was primarily driven by the receipt of advance payments from customers, and related billings, exceeding reductions from recognition of revenue as performance obligations were satisfied. For the six months ended June 30, 2018, the Company recognized revenue of $60,492, and billed customers $50,119, that was previously included in the beginning balance of contract liabilities. Changes in contract liabilities are also driven by reclassifications to or from contract assets as a result of timing of customer payments.

Contracts are often modified for a change in scope or other requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the Company’s contract modifications are for goods or services that are not distinct from the existing performance obligations. The effect of a contract modification on the transaction price, and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or decrease) on a cumulative catchup basis.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Performance obligations are satisfied as of a point in time or over time and are supported by contracts with customers. For most of the Company’s contracts, there are multiple promises of goods or services. Typically, the Company provides a significant service of integrating a complex set of tasks and components such as design, engineering, construction management, and equipment procurement for a project contract. The bundle of goods and services are provided to deliver one output for which the customer has contracted. In these cases, the Company considers the bundle of goods and services to be a single performance obligation. The Company may also promise to provide distinct goods or services within a contract, such as a project contract for installation of energy conservation measures and post-installation O&M services. In these cases the Company separates the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.

Backlog - The Company’s remaining performance obligations (hereafter referred to as “backlog”) represent the unrecognized revenue value of the Company’s contract commitments. The Company’s backlog may vary significantly each reporting period based on the timing of major new contract commitments and the backlog may fluctuate with currency movements. In addition, our customers have the right, under some circumstances, to terminate contracts or defer the timing of the Company’s services and their payments to us. At June 30, 2019, the Company had backlog of approximately $1,695,300. Approximately 29% of our June 30, 2019 backlog is anticipated to be recognized as revenue in the next twelve months and the remaining, thereafter.

The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

Contract Acquisition Costs

The Company accounts for certain acquisition costs over the life of the contract, consisting primarily of commissions when paid. Commission costs are incurred commencing at contract signing. Commission costs are allocated across all performance obligations and deferred and amortized over the contract term and each performance obligations’ completion period.

For contracts that have a duration of less than one year, the Company follows a practical expedient and expenses these costs when incurred. During the six months ended June 30, 2019 and 2018, the amortization of commission costs related to contracts were not material and have been included in the accompanying condensed consolidated statements of income.

The Company capitalizes costs incurred related to the development of projects prior to contract signing as it is partial fulfillment of its performance obligations. Capitalized project development costs include only those costs incurred in connection with the development of energy projects, primarily direct labor, interest costs, outside contractor services, consulting fees, legal fees and travel, if incurred after a point in time where the realization of related revenue becomes probable. Project development costs incurred prior to the probable realization of revenue are expensed as incurred. The Company classifies as a current asset those project development efforts that are expected to proceed to construction activity in the twelve months that follow. The Company periodically reviews these balances and writes off any amounts where the realization of the related revenue is no longer probable. Project development costs of $211 and $639 were included in other long-term assets as of June 30, 2019 and December 31, 2018, respectively.

During the six months ended June 30, 2019 and 2018, $11,033 and $6,010, respectively, of project development costs were recognized in the condensed consolidated statements of income on projects that converted to customer contracts.

No impairment charges in connection with the Company’s commission costs or project development costs were recorded during the periods ended June 30, 2019 and 2018.