Revenue from Contracts with Customers

9 Months Ended

Sep. 27, 2020

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following tables represent disaggregated revenue from contracts with customers for the three and nine months ended September 27, 2020, and September 29, 2019 along with the reportable segment for each category:

	Three Months Ended
(In thousands)	September 27, 2020								September 29, 2019
Category	Residential, Light Commercial		Commercial and Industrial Solutions		Others		Total		Residential, Light Commercial		Commercial and Industrial Solutions		Others		Total
Solar power systems sales and EPC services	191,016		73,840		2,688		267,544		195,686		58,507		8,354		262,547
Operations and maintenance	—		—		75		75		—		4,659		10,074		14,733
Residential leasing	1,284		—		—		1,284		3,523		—		—		3,523
Solar services1	5,485		418		—		5,903		4,881		358		—		5,239
Revenue	$	197,785	$	74,258	$	2,763	$	274,806	$	204,090	$	63,524	$	18,428	$	286,042

	Nine Months Ended
(In thousands)	September 27, 2020								September 29, 2019
Category	Residential, Light Commercial		Commercial and Industrial Solutions		Other		Total		Residential, Light Commercial		Commercial and Industrial Solutions		Other		Total
Solar power systems sales and EPC services	568,303		170,403		3,147		741,853		458,141		147,221		22,973		628,335
Operations and maintenance	—		3,619		19,844		23,463		—		7,696		29,592		37,288
Residential leasing	3,937		—		—		3,937		9,083		—		—		9,083
Solar services1	12,524		1,242		—		13,766		15,046		856		—		15,902
Revenue	$	584,764	$	175,264	$	22,991	$	783,019	$	482,270	$	155,773	$	52,565	$	690,608

1 Upon adoption of ASC 842, revenues from residential leasing are being accounted for under ASU No. 2014-09 ("ASC 606") and recorded under 'Solar services'

We recognize revenue for sales of modules and components at the point that control transfers to the customer, which typically occurs upon shipment or delivery to the customer, depending on the terms of the contract, and we recognize revenue for operations and maintenance and solar services over the term of the service period.

For EPC revenue and solar power systems sales, we commence recognizing revenue when control of the underlying system transfers to the customer and continue recognizing revenue over time as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. For contracts in which we sell membership interests in certain project companies that are owned by a to joint venture formed between Total and Hannon Armstrong, we recognize revenue for the initial development and other solar assets at the point that control transfers to the customer, and we recognize continuing EPC revenue for work provided to the joint venture over time as work is performed.

Judgment is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize. If estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known. For contracts with post-installation systems monitoring and maintenance, we recognize revenue related to systems monitoring and maintenance over the non-cancellable contract term on a straight-line basis.

Changes in estimates for EPC services occur for a variety of reasons, including but not limited to (i) construction plan accelerations or delays, (ii) product cost forecast changes, (iii) change orders, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect in our condensed consolidated statements of operations. The table below outlines the impact on revenue of net changes in estimated transaction prices and input costs for systems related sales contracts (both increases and decreases) for the three and nine months ended September 27, 2020 and September 29, 2019 as well as the number of projects that comprise such changes. For purposes of the following table, only projects with changes in estimates that have an impact on revenue and or cost of at least $1.0 million during the periods were presented. Also included in the table is the net change in estimate as a percentage of the aggregate revenue for such projects.

	Three Months Ended						Nine Months Ended
(In thousands, except number of projects)	September 27, 2020			September 29, 2019			September 27, 2020			September 29, 2019
Increase (decrease) in revenue from net changes in transaction prices	$	1,142		$	—		$	834		$	(3,301)
Increase (decrease) in revenue from net changes in input cost estimates	(1,041)			1,734			(1,092)			4,144
Net decrease in revenue from net changes in estimates	$	101		$	1,734		(258)			$	843
Number of projects	2			1			4			2
Net change in estimate as a percentage of aggregate revenue for associated projects	0.3		%	3.6		%	(0.2)		%	1.5		%

Contract Assets and Liabilities

Contract assets consist of (i) retainage which represents the earned, but unbilled, portion of a construction and development project for which payment is deferred by the customer until certain contractual milestones are met; and (ii) unbilled receivables which represent revenue that has been recognized in advance of billing the customer, which is common for long-term construction contracts. Contract liabilities consist of deferred revenue and customer advances, which represent consideration received from a customer prior to transferring control of goods or services to the customer under the terms of a sales contract. Refer to "Note 6. Balance Sheet Components" for further details.

During the three and nine months ended September 27, 2020, the increase in contract assets of $5.7 million and $4.5 million, respectively, was primarily driven by billings for commercial projects where certain milestones had not yet been reached, but criteria for revenue recognition has been met. During the three and nine months ended September 29, 2019, the increase in contract assets of $26.0 million and $18.4 million, respectively, was primarily driven by unbilled receivables for commercial projects where certain milestones had not yet been reached, but the criteria for revenue had been met. During the three and nine months ended September 27, 2020, the decrease in contract liabilities of $2.0 million and $6.7 million, respectively, was primarily due to utilization of customer advances. During the three and nine months ended September 29, 2019, the increase in contract liabilities of $15.2 million and $16.7 million was primarily due to additional customer advances. During the three and nine months ended September 27, 2020, we recognized revenue of $26.9 million and $78.4 million that was included in contract liabilities as of June 28, 2020 and December 29, 2019, respectively. During the three and nine months ended September 29, 2019, we recognized revenue of $32.5 million and $29.2 million, respectively, that was included in contract liabilities as of June 30, 2019 and December 30, 2018, respectively.

The following table represents our remaining performance obligations as of September 27, 2020 for EPC agreements for projects that we are constructing or expect to construct. We expect to recognize $140.5 million of revenue upon transfer of control of the projects.

Project	Revenue Category	EPC Contract/Partner Developed Project	Expected Year Revenue Recognition Will Be Completed	Average Percentage of Revenue Recognized
Various Distribution Generation Projects	Solar power systems sales and EPC services	Various	2021	76.9%

As of September 27, 2020, we have entered into contracts with customers for sales of modules, components, and residential solar systems, for an aggregate transaction price of $211.9 million, the substantial majority of which we expect to recognize over the next 12 months.