Revenue Recognition

9 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue Recognition

2. Revenue Recognition

In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

The Company primarily derives product revenue from the sale of its manufactured products. Revenue from these product sales, including the sale of used rental equipment, is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales price is probable. The Company records deferred revenue when customer funds are received prior to shipment or delivery or performance has not yet occurred. The Company assesses collectability during the contract assessment phase. In situations where collectability of the sales price is not probable, the Company recognizes revenue when it determines that collectability is probable or when non-refundable cash is received from its customers and there is not a significant right of return. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract. The Company’s products are generally sold without any customer acceptance provisions, and the Company’s standard terms of sale do not allow customers to return products for credit.

Revenue from engineering services is recognized as services are rendered over the duration of a project, or as billed on a per hour basis. Field service revenue is recognized when services are rendered and is generally priced on a per day rate.

The Company also generates revenue from short-term rentals under operating leases of its manufactured products. Rental revenue is recognized as earned over the rental period if collectability of the rent is reasonably assured. Rentals of the Company’s equipment generally range from daily rentals to minimum rental periods of up to one year. The Company has determined that ASC 606 does not apply to rental contracts, which are within the scope of ASC Topic 842, Leases.

As permissible under ASC 606, sales taxes and transaction-based taxes are excluded from revenue. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally, the Company expenses costs incurred to obtain contracts when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expenses.

The Company has elected to treat shipping and handling activities in a sales transaction after the customer obtains control of the goods as a fulfillment cost and not as a promised service. Accordingly, fulfillment costs related to the shipping and handling of goods are accrued at the time of shipment. Amounts billed to a customer in a sales transaction related to reimbursable shipping and handling costs are included in revenue and the associated costs incurred by the Company for reimbursable shipping and handling expenses are reported in cost of revenue.

During the third quarter of fiscal year 2020, the Company was awarded an approximate $10.5 million contract (inclusive of a subsequent contract amendment of $0.3 million) with the U.S. Customs and Border Protection (the “CBP”) to provide a technology solution to the Department of Homeland Security. Revenue recognized under the contract for the nine months ended June 30, 2022 and 2021 was $0.3 million and $9.9 million, respectively. The Company completed this contract in the second quarter of fiscal year 2022 and has recognized revenue on the entire amount of the contract. No performance obligations remain under the contract. Unsatisfied performance obligations on all other contracts held by the Company at June 30, 2022 had an original duration of one year or less.

At June 30, 2022 and September 30, 2021, the Company had no deferred contract costs or deferred contract liabilities. During the three and nine months ended June 30, 2022 and 2021, no revenue was recognized from deferred contract liabilities and no cost of revenue was recognized from deferred contract costs.

During the second quarter of fiscal year 2020, the Company partially financed a $12.5 million product sale by entering into a $10.0 million promissory note with the customer. The note has a three-year term with monthly principal and interest payments of $0.3 million. Due to the financial condition of the customer, the Company had concerns over the probable collectability of the promissory note. As a result, the Company did not recognize any revenue or cost of revenue on the product sale through its first quarter of fiscal year 2021. During the second quarter of fiscal year 2021, as a result of new information received from the customer, management determined that it was probable that the customer would satisfy its remaining payment obligations on the promissory note with the

Company and recognized revenue of $12.5 million on the product sale. During the fourth quarter of fiscal year 2021, the Company granted the customer a six-month principal payment forbearance. The customer recommenced its monthly payments to the Company in the second quarter of fiscal year 2022. The customer has made payments totaling $8.7 million (exclusive of interest) as of June 30, 2022 related to the product sale, and the balance outstanding on the promissory note at June 30, 2022 was $3.8 million. Deferred contract costs associated with this sale were recognized in the second quarter of fiscal year 2021.

For each of the Company’s operating segments, the following table presents revenue only from the sale of products and the performance of services under contracts with customers (in thousands). Therefore, the table excludes all revenue earned from rental contracts.

	Three Months Ended				Nine Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Oil and Gas Markets
Traditional exploration product revenue	$	1,592	$	1,949	$	3,389	$	3,736
Wireless exploration product revenue		100		4,264		14,358		26,923
Reservoir product revenue		692		1,071		1,513		1,565
Total revenue		2,384		7,284		19,260		32,224
Adjacent Markets
Industrial product revenue		7,465		6,451		18,471		15,835
Imaging product revenue		3,429		2,883		9,708		7,923
Total revenue		10,894		9,334		28,179		23,758
Emerging Markets
Revenue		135		1,061		571		10,023
Corporate
Revenue		50		—		50		—
Total	$	13,463	$	17,679	$	48,060	$	66,005

See Note 13 for more information on the Company’s operating segments.

For each of the geographic areas where the Company operates, the following table presents revenue (in thousands) from the sale of products and services under contracts with customers. The table excludes all revenue earned from rental contracts:

	Three Months Ended				Nine Months Ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Asia	$	1,223	$	4,088	$	7,580	$	16,554
Canada		577		279		1,634		1,167
Europe		1,625		3,223		14,368		6,102
United States		9,297		9,401		22,621		40,820
Other		741		688		1,857		1,362
Total	$	13,463	$	17,679	$	48,060	$	66,005

Revenue is attributable to countries based on the ultimate destination of the product sold, if known. If the ultimate destination is not known, revenue is attributable to countries based on the geographic location of the initial shipment.