Contract Receivables

9 Months Ended

Sep. 30, 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)	September 30, 2023			December 31, 2022

Billed receivables	$	4,385		$	6,074
Unbilled receivables		6,755			5,146
Allowance for credit loss		(443	)		(1,156	)
Total contract receivables, net	$	10,697		$	10,064

During the first 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 nine months ended September 30, 2023.

(in thousands)
Beginning balance at January 1, 2023	$	1,156
Adoption of ASC326 Current Expected Credit Losses (CECL)		57
Adjusted balance at January 1, 2023		1,213
Current period provision for expected credit (recovery) loss		(1	)
Write-offs charged against the allowance, net of recoveries		(729	)
Currency adjustment		(40	)
Balance at September 30, 2023	$	443

During the three months ended September 30, 2023 we recorded credit loss expense of $(6) thousand, and no credit loss expense was recorded during the three months ended September 30, 2022. During the nine months ended September 30, 2023 and 2022, we recorded credit loss expense of $24 thousand and $97 thousand, respectively. The write-offs charged against the allowance, net of recoveries is related to an unbilled receivable balance for a customer contract with our GSE Beijing entity, and had been fully reserved during the year ended 2021. During the three months ended June 30, 2023, management determine this amount to be fully uncollectible and was written off against the allowance.

During the month of October 2023, we invoiced $3.2 million of the unbilled receivables as of September 30, 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 September 30, 2023 and 2022, we recognized a (loss) gain on remeasurement of these foreign exchange contracts of ($32) thousand and $6 thousand, respectively. During the nine months ended September 30, 2023 and 2022, we recognized a loss on remeasurement of these foreign exchange contracts of $(15) thousand and $(51) thousand, respectively.