Revenue Receivables and Contract Assets and Liabilities

9 Months Ended

Sep. 27, 2024

Revenue from Contract with Customer [Abstract]

Revenue Receivables and Contract Assets and Liabilities

Note 3. Revenue, Receivables and Contract Assets and Liabilities

The following table presents the Company’s revenue disaggregated by contract types:

	Three Months Ended				Nine Months Ended
	September 27,		September 29,		September 27,		September 29,
(In thousands)	2024		2023		2024		2023
Fixed-price	$	153,802	$	153,178	$	349,182	$	440,015
Cost reimbursable		11,602		19,864		25,983		48,757
Equipment and labor revenue		631		2,406		1,519		5,972
Total revenue	$	166,035	$	175,448	$	376,684	$	494,744

Projects started after the AECOM Sale Transactions ("Shimmick Projects") have focused on water infrastructure and other critical infrastructure. Projects that focus on foundation drilling are referred to as "Foundations Projects". Projects that started prior to consummation of the AECOM Sale Transactions are referred to as "Legacy Projects".

The following table presents the Company’s revenue disaggregated by Shimmick Projects, Foundations Projects and Legacy Projects:

	Three Months Ended				Nine Months Ended
	September 27,		September 29,		September 27,		September 29,
(In thousands)	2024		2023		2024		2023
Shimmick Projects	$	101,475	$	109,884	$	275,457	$	301,475
Foundations Projects		10,837		11,523		25,931		40,615
Legacy Projects(1)		53,723		54,041		75,296		152,654
Total revenue	$	166,035	$	175,448	$	376,684	$	494,744

(1) Legacy Projects revenue for the three and nine months ended September 27, 2024 reflects a $31 million increase to revenue as a result of the GGB Project settlement in which the Company will receive $97 million in cash and a contract change order for reduced scope of work of $6 million. See Note 12 – Subsequent Events for additional details. Legacy Projects revenue for the nine months ended September 27, 2024 also reflects a reduction to revenue of $23 million recorded during the three months ended June 28, 2024 to write off previously recorded contract assets as a result of a settlement of a claim with the United States Army Corps of Engineers.

Remaining performance obligations

The Company had $777 million of remaining performance obligations yet to be satisfied as of September 27, 2024. Our remaining performance obligations have a weighted average life of 2.0 years as of September 27, 2024.

Contract Balances

The following table provides information about contract assets (also referred to as costs and estimated earnings in excess of billings on uncompleted contracts and retainage receivable) and contract liabilities (also referred to as billings on uncompleted contracts in excess of costs and estimated earnings and forward loss reserve), which include assets and liabilities that are dependent upon future activity:

	September 27,			December 29,
	2024			2023			Change
(In thousands)
Contract assets, current and non-current:
Costs and estimated earnings in excess of billings on uncompleted contracts	$	127,518		$	125,943		$	1,575
Retainage receivable		49,159			48,316			843
Total contract assets		176,677			174,259			2,418
Contract liabilities, current and non-current:
Billings on uncompleted contracts in excess of costs and estimated earnings		(42,998	)		(48,841	)		5,843
Forward loss reserve		(54,629	)		(70,159	)		15,530
Total contract liabilities		(97,627	)		(119,000	)		21,373
Net	$	79,050		$	55,259		$	23,791

Contract terms with customers include the timing of billing and payment, which usually differs from the timing of revenue recognition. As a result, the Company carries contract assets and liabilities within the condensed consolidated balance sheets. These contract assets and liabilities are calculated on a contract-by-contract basis and reported on a net basis at the end of each period and are classified as current or non-current. Many of the contracts under which the Company performs work also contain retainage provisions. Retainage refers to that portion of our billings held for payment by the customer pending satisfactory completion of the project. Unless reserved, the Company assumes that all amounts retained by customers under such provisions are fully collectible. These assets and liabilities are reported in the condensed consolidated balance sheets within “Contract assets, current,” “Contract assets, non-current,” “Contract liabilities, current" and “Contract liabilities, non-current." Costs and estimated earnings in excess of billings on uncompleted contracts consists of revenue recognized in excess of billings. Billings on uncompleted contracts in excess of costs and estimated earnings consists of billings in excess of revenue recognized. The Company recognized revenue of $41 million during the nine months ended September 27, 2024 that was included in contract liabilities as of December 29, 2023.

The Company’s timing of revenue recognition may not be consistent with its rights to bill and collect cash from its clients. Those rights are generally dependent upon advance billing terms, milestone billings based on the completion of certain phases of work or when services are performed. The Company’s accounts receivable represents amounts billed to clients that have yet to be collected and represent an unconditional right to cash from its clients as presented below.

	September 27,			December 29,
	2024			2023
(In thousands)
Total accounts receivable, gross	$	54,470		$	55,202
Allowance for credit losses		(954	)		(1,024	)
Accounts receivable, net	$	53,516		$	54,178

Substantially all contract assets as of September 27, 2024 and December 29, 2023 are expected to be collected within the Company’s estimated operating cycle, except for retainage and claims pertaining to certain contracts. The Company’s operating cycle may extend beyond one year.

The Company is in the process of negotiating or awaiting approval of unapproved change orders and claims with its customers. The Company is proceeding with its contractual rights to recoup additional costs incurred from its customers based on completing work associated with change orders, including change orders with pending change order pricing, or claims related to significant changes in scope which resulted in substantial delays and additional costs in completing the work. The Company may take legal action if it and the customer cannot reach a mutually acceptable resolution.

Information about significant customers

Significant Customers as a Percentage of Accounts Receivable, Net
As of September 27, 2024
Customer one	32.8%
Customer two	18.6%
As of December 29, 2023
Customer one	32.5%
Customer two	21.7%

Significant Customers as a Percentage of Revenue
Three Months Ended September 27, 2024
Customer one	22.8%
Customer two	11.9%
Customer three	11.8%
Customer four	10.8%
Three Months Ended September 29, 2023
Customer one	15.3%
Customer two	13.9%
Customer three	13.1%

Significant Customers as a Percentage of Revenue
Nine Months Ended September 27, 2024
Customer one	17.3%
Customer two	14.6%
Customer three	12.1%
Nine Months Ended September 29, 2023
Customer one	15.5%
Customer two	14.2%
Customer three	12.5%

Revisions in Estimates

Changes in contract estimates resulted in net increases in gross margin of $7 million for the three months ended September 27, 2024, primarily due to the favorable GGB Project settlement described in Note 12 - Subsequent Events, partially offset by increased forecasted cost to complete loss jobs. Changes in contract estimates resulted in net decreases in gross margin of $44 million for the nine months ended September 27, 2024, primarily due to the United States Army Corps of Engineers settlement and increased forecasted cost to complete loss jobs, partially offset by the GGB Project settlement.

Changes in contract estimates resulted in net increases in gross margin of $5 million for the three months ended September 29, 2023, primarily due to a change in an outstanding claim. Changes in contract estimates resulted in net decreases in gross margin of $10 million for the nine months ended September 29, 2023, primarily due to increased forecasted costs to complete and an agreed upon contract settlement lower than previously estimated, partially offset by increases in gross margin on an outstanding claim.