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Revenue

3 Months Ended

Mar. 31, 2020

13. REVENUE

On March 31, 2020, the Company had $1.7 billion of remaining performance obligations, which represents the transaction price of firm orders less inception to date revenues recognized. Remaining performance obligations generally exclude unexercised contract options and indefinite delivery/indefinite quantity contracts. The Company expects to recognize revenues relating to existing performance obligations of approximately $1.1 billion, $0.4 billion, and $0.2 billion for the remaining nine months ended December 31, 2020, and the year ending December 31, 2021 and thereafter, respectively.

Contract liabilities by segment are as follows:



As of March 31, 2020		Earth Intelligence¹			Space Infrastructure			Total
Contract liabilities		$	101		$	122		$	223

As of December 31, 2019		Earth Intelligence¹			Space Infrastructure			Total
Contract liabilities		$	130		$	145		$	275

¹

The contract liability balance associated with the Company’s EnhancedView Contract was $49 million and $78 million as of March 31, 2020 and December 31, 2019, respectively. During the three months ended March 31, 2020, imputed interest on advanced payments increased the contract liability balance by $1 million, and $30 million in revenue was recognized, decreasing the contract liability balance. The contract liability balance associated with the Company’s EnhancedView Contract is expected to be recognized as revenue through August 31, 2020.

The decrease in total contract liabilities was primarily due to revenues recognized based upon satisfaction of performance obligations.

The Company’s primary sources of revenues are as follows:



Three Months Ended March 31, 2020		Earth Intelligence			Space Infrastructure			Eliminations			Total
Product revenues		$	—		$	107		$	—		$	107
Service revenues			271			3			—			274
Intersegment			—			22			(22)			—
		$	271		$	132		$	(22)		$	381

Three Months Ended March 31, 2019		Earth Intelligence			Space Infrastructure			Eliminations			Total
Product revenues		$	—		$	166		$	—		$	166
Service revenues			254			11			—			265
Intersegment			—			33			(33)			—
		$	254		$	210		$	(33)		$	431

Certain of the Company’s contracts with customers in the Space Infrastructure segment include a significant financing component since payments are received from the customer more than one year after delivery of the promised goods or services. The Company recognized orbital interest revenue of $7 million for both the three months ended March 31, 2020 and 2019, respectively related to these contracts, which is included in product revenues.

Revenue in the Space Infrastructure segment is primarily generated from long-term construction contracts. Due to the long-term nature of these contracts, the Company generally recognizes revenue over time using the cost-to-cost method of accounting to measure progress. Under the cost-to-cost method of accounting, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion ("EAC"). An EAC includes all direct costs and indirect costs directly attributable to a program or allocable based on program cost pooling arrangements. Estimates regarding the Company’s cost associated with the design, manufacture and delivery of products and services are used in determining the EAC. Changes to an EAC are recorded as a cumulative adjustment to revenue.

For the three months ended March 31, 2020, the Company incurred COVID-19 related EAC growth of $18 million within the Space Infrastructure segment. The changes in the EACs are due to increases in estimated program costs associated with the COVID-19 operating posture and the estimated impact of certain items such as supplier delays and increased labor hours. These costs are considered incremental and separable from normal operations. The COVID-19 EAC growth assumes, among other things, that the current shelter in place order in California is substantially relaxed effective July 2020.

During the three months ended March 31, 2020, the Company recorded an additional $19 million estimated loss on a commercial satellite program which includes significant development efforts further delayed by COVID-19. The COVID-19 impact on this program was $12 million which is included in our total COVID-19 impact discussed above.

The revenues based on geographic location of customers are as follows:


	Three Months Ended March 31,
		2020			2019
United States	$	302		$	311
Asia		27			54
South America		9			39
Europe		18			7
Middle East		13			9
Other		12			11
Total revenues	$	381		$	431

Revenues from significant customers are as follows:



Three Months Ended March 31, 2020		Earth Intelligence			Space Infrastructure			Eliminations			Total
U.S. federal government and agencies		$	199		$	65		$	—		$	264
Commercial and other			72			67			(22)			117
Total revenues		$	271		$	132		$	(22)		$	381


Three Months Ended March 31, 2019		Earth Intelligence			Space Infrastructure			Eliminations			Total
U.S. federal government and agencies		$	190		$	23		$	—		$	213
Commercial and other			64			187			(33)			218
Total revenues		$	254		$	210		$	(33)		$	431