Contract Receivables

3 Months Ended

Mar. 31, 2023

Note 5 - Contract Receivables

Contract receivables represent our unconditional rights to consideration due from our domestic and international customers. We expect to collect all contract receivables within the next twelve months.

The components of contract receivables were as follows:

(in thousands)	March 31, 2023			December 31, 2022

Billed receivables	$	5,831		$	6,074
Unbilled receivables		5,859			5,146
Allowance for credit loss		(1,226	)		(1,156	)
Total contract receivables, net	$	10,464		$	10,064

During the fist quarter of 2023, the Company adopted ASU 2016-13, “Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including accounts receivable. Under the new guidance, an entity recognizes its estimate of lifetime expected credit losses as an allowance, which the FASB believes will result in more timely recognition of such losses. Under the CECL impairment model, the Company develops and documents its allowance for credit losses on its contract receivables based on three portfolio segments by customer geographic location: North America, China, Rest of World (ROW). The determination of portfolio segments is based primarily on the qualitative consideration of the nature of the Company’s business operations and the characteristics of the underlying trade receivables.

The following table sets forth the activity in the allowance for credit losses for the three months ended March 31, 2023.

(in thousands)
Beginning balance at January 1, 2023	$	1,213
Current period provision for expected credit loss		9
Write-offs charged against the allowance, net of recoveries		-
Currency adjustment		4
Balance at March 31, 2023	$	1,226

During the three months ended March 31, 2023, we recorded credit loss expense of $32 thousand. We recorded no credit loss expense during the three months ended March 31, 2022.

During the month of April 2023, we invoiced $3.0 million of the unbilled receivables as of March 31, 2023.

Our foreign currency denominated contract receivables, billings in excess of revenue earned and subcontractor accruals that are related to the outstanding foreign exchange contracts are remeasured at the end of each reporting period into our functional currency, using the current exchange rate at the end of the period. The gain or loss resulting from such remeasurement is included in other income, net in the consolidated statements of operations. During the three months ended March 31, 2023 and 2022, we recognized a gain on remeasurement of these foreign exchange contracts of $72 thousand and $3 thousand, respectively.

As of March 31, 2023, we had one customer that accounted for 17% of our consolidated contract receivables. As of December 31, 2022, we had no customer that accounted for 10% of our consolidated contract receivables.