REVENUES FROM CONTRACTS WITH CUSTOMERS

12 Months Ended

Jan. 31, 2023

REVENUES FROM CONTRACTS WITH CUSTOMERS

REVENUES FROM CONTRACTS WITH CUSTOMERS

NOTE 4 – REVENUES FROM CONTRACTS WITH CUSTOMERS

Variable Consideration

Amounts for contract variations for which the Company has project-owner directive for additional work or other scope change, but not for the price associated with the corresponding additional effort, are included in the transaction price when it is considered probable that the applicable costs will be recovered through a modification to the contract price. The effects of any revision to a transaction price can be determined at any time and they could be material. The Company includes in the corresponding transaction price an estimate of the amount that it expects to receive from a claim based on management’s judgement regarding all reasonably available information. Once a final amount has been determined, the transaction price may be revised again to reflect the final resolution. At January 31, 2023 and 2022, the aggregate amounts of such contract variations included in the transaction prices that were still pending customer acceptance were $11.6 million and $7.5 million, respectively. Variations related to the Company’s contracts typically represent modifications to the existing contracts and performance obligations and do not represent new performance obligations. Actual costs related to any changes in the scope of the corresponding contract are expensed as they are incurred. Changes to total estimated contract costs and losses, if any, are reflected in operating results for the period in which they are determined.

The Company’s long-term contracts typically have schedule dates and other performance objectives that if not achieved could subject the Company to liquidated damages. These contract requirements generally relate to specified activities that must be completed by an established date or by the achievement of a specified level of output or efficiency. Each applicable contract defines the conditions under which a project owner may be entitled to any liquidated damages. At the outset of each of the Company’s contracts, the potential amounts of liquidated damages typically are not subtracted from the transaction price as the Company believes that it has included activities in its contract plan, and the associated forecasted contract costs, that will be effective in preventing such damages. Of course, circumstances may change as the Company executes the corresponding contract. The transaction price is reduced by an applicable amount when the Company no longer considers it probable that a future reversal of revenues will not occur when the matter is resolved. The Company considers potential liquidated damages, the costs of other related items and potential mitigating factors in determining the adequacy of its regularly updated estimates of the amounts of gross profit expected to be earned on active projects.

In other cases, the Company may have the grounds to assert liquidated damages against subcontractors, suppliers, project owners or other parties related to a project. Such circumstances may arise when the Company’s activities and progress are adversely affected by delayed or damaged materials, challenges with equipment performance or other events out of the Company’s control where the Company has rights to recourse, typically in the form of liquidated damages. In general, the Company does not adjust the corresponding contract accounting until it is probable that the favorable cost relief will be realized. Such adjustments have been and could be material.

The Company records adjustments to revenues and profits on contracts, including those associated with contract variations and estimated cost changes, using a cumulative catch-up method. Under this method, the impact of an adjustment to the amount of revenues recognized to date is recorded in the period that the adjustment is identified. Estimated variable consideration amounts are determined by the Company based primarily on the single most likely amount in the range of possible consideration amounts. Revenues and profits in future periods of contract performance are recognized using the adjusted amounts of transaction price and estimated contract costs.

Remaining Unsatisfied Performance Obligations (“RUPO”)

Substantially all of the Company’s customer contracts include the right for customers to terminate contracts for convenience. Current accounting guidance indicates that the value of future work that companies are contractually obligated to perform pursuant to active customer contracts should not be included in the disclosure of RUPO when the corresponding contracts include termination for convenience clauses without substantial penalties accruing to the customers upon such terminations. In the application of this guidance, management assesses whether the nature of the work being performed under contract is largely service-based and repetitive and should be considered a succession of one-month contracts for the duration of the identified term of the contract. Predominantly, the Company’s customers contract with the Company to construct assets, to fabricate materials or to perform emergency maintenance or outage services where management believes a substantial penalty or cost would be incurred upon a termination for convenience. Management believes that in substantially all cases, there would be substantial costs incurred by a customer if it terminated a contract with the Company for convenience including the costs of terminating subcontracts, canceling purchase orders

and returning or otherwise disposing of delivered materials and equipment. The value of RUPO on customer contracts represents an amount based on contracts or orders received from customers that the Company believes are firm and where the parties are acting in accordance with their respective obligations.

RUPO may differ from disclosed amounts of project backlog. As project backlog includes amounts of revenues that the Company expects to recognize in the future under its EPC and other construction services contracts, RUPO represents the unrecognized revenue value of these types of active contracts with customers as determined under the revenue recognition rules of U.S. GAAP. The Company believes that its reported RUPO amount as of January 31, 2023 related to current contracts is firm. The cancellation or termination of contracts for the convenience of customers has not had a material adverse effect on our consolidated financial statements.

At January 31, 2023, the Company had RUPO of $0.8 billion. The largest portion of RUPO at any date usually relates to EPC services and other construction contracts with typical performance durations of one to three years. However, the length of certain significant construction projects may exceed three years. The Company estimates that approximately 54% of the RUPO amount at January 31, 2023 will be included in the amount of consolidated revenues that will be recognized during the year ending January 31, 2024 (“Fiscal 2024”). Most of the remaining amount of the RUPO amount at January 31, 2023 is expected to be recognized in revenues during the fiscal years ending January 31, 2025 (“Fiscal 2025”) and 2026 (“Fiscal 2026”).

It is important to note that estimates may be changed in the future and that cancellations, deferrals or scope adjustments may occur related to work included in the amount of RUPO at January 31, 2023. Accordingly, RUPO may be adjusted to reflect project delays and cancellations, revisions to project scope and cost and foreign currency exchange fluctuations, or to revise estimates, as effects become known. Such adjustments to RUPO may materially reduce future revenues below Company estimates.

Disaggregation of Revenues

The following table presents consolidated revenues for Fiscal 2023, Fiscal 2022 and Fiscal 2021, disaggregated by the geographic area where the corresponding projects were located:

	2023		2022		2021
United States	$	328,850	$	456,211	$	340,615
Republic of Ireland		68,242		35,044		13,638
United Kingdom		57,948		17,521		37,836
Other		—		594		117
Consolidated Revenues	$	455,040	$	509,370	$	392,206

Revenues for projects located in Ireland and the U.K. are attributed to the power industry services segment. The major portions of the Company’s consolidated revenues are recognized pursuant to fixed-price contracts with most of the remaining portions earned pursuant to time-and-material contracts. Consolidated revenues are disaggregated by reportable segment in Note 17 to the consolidated financial statements.