REVENUE RECOGNITION AND RECEIVABLES

3 Months Ended

Mar. 31, 2021

REVENUE RECOGNITION AND RECEIVABLES

REVENUE RECOGNITION AND RECEIVABLES

3. REVENUE RECOGNITION AND RECEIVABLES

Contract Assets and Liabilities

The Company recognizes contract assets and liabilities on its balance sheet. Contract assets represent unbilled amounts typically resulting from retail wireless contracts with both a multiyear service period and a promotional discount. In these contracts the revenue recognized exceeds the amount billed to the customer. The current portion of the contract asset is recorded in prepayments and other current assets and the noncurrent portion is included in other assets on the Company’s balance sheets.

Contract liabilities consist of advance payments and billings in excess of revenue recognized. Retail revenue for postpaid customers is generally billed one month in advance and recognized over the period that the corresponding service is rendered to customers. To the extent the service is not provided by the reporting date the amount is recognized as a contract liability. Prepaid service, including mobile voice and data services, sold to customers is recorded as deferred revenue prior to the commencement of services. Contract liabilities are recorded in advanced payments and deposits on the Company’s balance sheets.

In July 2019, August 2020 and May 2021, the Company entered into a Network Build and Maintenance Agreement (the “FirstNet Agreement”) with AT&T Mobility, LLC (“AT&T”) and the First and Second Amendments to the FirstNet Agreement, respectively (the “FirstNet Transaction”). In connection with the FirstNet Transaction, the Company will build a portion of AT&T’s network for the First Responder Network Authority (“FirstNet”) as well as a commercial wireless network in or near the Company’s current operating area in the Southwestern United States. The FirstNet Transaction includes construction and service performance obligations. The Company allocated the transaction price of the FirstNet Agreement to each performance obligation based on the relative standalone selling price of each performance obligation in the contract. The standalone selling price is the estimated price the Company would charge for

the good or service in a separate transaction with similar customers in similar circumstances. The current portion receivables under this agreement are recorded in Customer receivable and the long-term portion is recorded in Customer receivable long-term on the Company’s balance sheet.

The Company has certain wholesale roaming agreements that contain stand ready performance obligations and management allocates transaction value to performance obligations based on the standalone selling price. The standalone selling price is the estimated price the Company would charge for the good or service with similar customers in similar circumstances. Management determined the performance obligations were obligations to make the service continuously available and will recognize revenue evenly over the service period.

Contract assets and liabilities consisted of the following (amounts in thousands)

	March 31, 2021		December 31, 2020			$ Change	% Change
Contract asset – current	$	3,044	$	2,478	$	566	23	%
Contract asset – noncurrent		1,141		910		231	25	%
Contract liability – current		(17,159)		(18,544)		1,385	7	%
Contract liability – noncurrent		(2,255)		(2,193)		(62)	(3)	%
Net contract liability	$	(15,229)	$	(17,349)	$	2,120	12	%

The contract asset – current is included in prepayments and other current assets and the contract asset – noncurrent is included in other assets on the Company’s balance sheet. The contract liability – current is included in advance payments and deposits and the contract liability – noncurrent is included in other liabilities on the Company’s balance sheet. The decrease in the Company’s net contract liability was due to the timing of customer prepayments, contract billings, and the FirstNet Transaction. During the three months ended March 31, 2021, the Company recognized revenue of $15.1 million related to its December 31, 2020 contract liability and amortized $0.7 million of the December 31, 2020 contract asset into revenue. The Company did not recognize any revenue in the three months ended March 31, 2021 related to performance obligations that were satisfied or partially satisfied in previous periods.

Contract Acquisition Costs

The March 31, 2021 balance sheet includes current contract acquisition costs of $1.7 million in prepayments and other current assets and long term contract acquisition costs of $1.5 million in other assets. During the three months ended March 31, 2021, the Company amortized $0.6 million of contract acquisition cost.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price allocated to unsatisfied performance obligations of certain multiyear retail wireless contracts, which include a promotional discount, and the Company’s construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $273 million and $299 million at March 31, 2021 and December 31, 2020, respectively. The Company expects to satisfy approximately 60% of the remaining performance obligations and recognize the transaction price within 24 months and the remainder thereafter.

The Company has certain retail, wholesale, and renewable energy contracts where transaction price is allocated to remaining performance obligations. However, the Company omits these contracts from its disclosure by applying the right to invoice, one year or less, and wholly unsatisfied performance obligation practical expedients.

Disaggregation

The Company's revenue is presented on a disaggregated basis in Note 13 based on an evaluation of disclosures outside the financial statements, information regularly reviewed by the chief operating decision makers for evaluating the financial performance of operating segments and other information that is used for performance evaluation and resource allocations. This includes revenue from Communication Services and other revenue. Communication Services

revenue is further disaggregated into Mobility, Fixed, Carrier Services, and other services. Other revenue is further disaggregated into renewable energy, managed services and construction revenue. This disaggregation of revenue depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Receivables

The Company adopted ASU 2016-13 on January 1, 2020. The standard requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses is based on all relevant information including historical information, current conditions, and reasonable and supportable forecasts that affect the collectability of the amounts. The Company adopted ASU 2016-13 using the modified retrospective approach, however, there was no impact of adoption on retained earnings.

The standard impacted the Company’s calculation of credit losses from trade receivables. Historically, the Company recorded credit losses subsequent to the initial revenue transaction. After adoption of ASU 2016-13, the Company will record an estimate of future credit losses in conjunction with the revenue transaction based on the information available including historical experience and management’s expectations of future conditions. Those estimates will be updated as additional information becomes available. Our allowance for uncollectible accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics. There was no significant impact to the Company’s operating results due to the adoption of this standard.

At March 31, 2021, the Company had gross accounts receivable of $78.0 million and an allowance for credit losses of $13.0 million. The receivable under the FirstNet Agreement totaled $23.4 million of which $2.4 million was current and $21.0 million was long-term. At December 31, 2020, the Company had gross accounts receivable of $67.1 million and an allowance for credit losses of $12.1 million. The receivable under the FirstNet Agreement totaled $10.8 million of which $1.2 million was current and $9.6 million was long-term. The Company monitors receivables through the use of historical operating data adjusted for expectation of future performance as appropriate. Activity in the allowance for credit losses is below:

	Three months ended March 31, 2021		Three months ended March 31, 2020
Balance at beginning of period	$	12,121	$	12,724
Current period provision for expected losses		1,122		1,260
Write-offs charged against the allowance		(354)		(1,525)
Recoveries collected		124		208
Balance at end of period	$	13,013	$	12,667