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Revenue recognition | 6 Months Ended
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Jun. 30, 2023
Revenue from Contract with Customer [Abstract] |
Revenue recognition | Revenue recognition The Company operates as two operating segments (see Note 17, "Segment information"). The Company's revenues disaggregated by the major sources were as follows:
| Three Months Ended June 30, 2023 |  | Three Months Ended June 30, 2022
| USG |  | Non-USG |  | Total |  | USG |  | Non-USG |  | Total
Product sales, net | $ | 150.5 |  |  | $ | 151.7 |  |  | $ | 302.2 |  |  | $ | 118.2 |  |  | $ | 119.0 |  |  | $ | 237.2 |
CDMO: |  |  |  |  |  |  |  |  |  |  |
Services | — |  |  | 26.4 |  |  | 26.4 |  |  | — |  |  | 2.7 |  |  | 2.7 |
Leases | — |  |  | 2.7 |  |  | 2.7 |  |  | — |  |  | (4.5) |  |  | (4.5) |
Total CDMO | $ | — |  |  | $ | 29.1 |  |  | $ | 29.1 |  |  | $ | — |  |  | $ | (1.8) |  |  | $ | (1.8) |
Contracts and grants | 4.6 |  |  | 2.0 |  |  | 6.6 |  |  | 6.2 |  |  | 1.1 |  |  | 7.3 |
Total revenues | $ | 155.1 |  |  | $ | 182.8 |  |  | $ | 337.9 |  |  | $ | 124.4 |  |  | $ | 118.3 |  |  | $ | 242.7 |
| Six Months Ended June 30, 2023 |  | Six Months Ended June 30, 2022
| USG |  | Non-USG |  | Total |  | USG |  | Non-USG |  | Total
Product sales, net | $ | 176.6 |  |  | $ | 269.0 |  |  | $ | 445.6 |  |  | $ | 221.6 |  |  | $ | 252.7 |  |  | $ | 474.3 |
CDMO: |  |  |  |  |  |  |  |  |  |  |
Services | — |  |  | 39.8 |  |  | 39.8 |  |  | — |  |  | 54.5 |  |  | 54.5 |
Leases | — |  |  | 4.5 |  |  | 4.5 |  |  | — |  |  | 4.5 |  |  | 4.5 |
Total CDMO | $ | — |  |  | $ | 44.3 |  |  | $ | 44.3 |  |  | $ | — |  |  | $ | 59.0 |  |  | $ | 59.0 |
Contracts and grants | 9.5 |  |  | 3.6 |  |  | 13.1 |  |  | 15.3 |  |  | 1.6 |  |  | 16.9 |
Total revenues | $ | 186.1 |  |  | $ | 316.9 |  |  | $ | 503.0 |  |  | $ | 236.9 |  |  | $ | 313.3 |  |  | $ | 550.2 |
Termination of manufacturing services agreement with Janssen Pharmaceuticals, Inc. On July 2, 2020, the Company, through its wholly owned subsidiary, Emergent Manufacturing Operations Baltimore, LLC, entered into the Agreement with Janssen, one of the Janssen Pharmaceutical Companies of Johnson & Johnson, for large-scale drug substance manufacturing of Johnson & Johnson’s investigational SARS-CoV-2 vaccine, Ad26.COV2-S, recombinant based on the AdVac technology (the “Product”). On June 6, 2022, the Company provided to Janssen a notice (the “Notice”) of material breach of the Agreement for, among other things, failure by Janssen (i) to provide the Company the requisite forecasts of the required quantity of Product to be purchased by Janssen under the Agreement and (ii) to confirm Janssen’s intent to not purchase the requisite minimum quantity of the Product pursuant to the Agreement and instead, wind-down the Agreement ahead of fulfilling these minimum requirements. Later on June 6, 2022, the Company received from Janssen a purported written notice of termination (the “Janssen Notice”) of the Agreement for asserted material breaches of the Agreement by the Company, including alleged failure by the Company to perform its obligations in compliance with current good manufacturing practices ("cGMP") or other applicable laws and regulations and alleged failure by the Company to supply Janssen with the Product. Janssen alleged that the Company’s breaches were not curable and that, therefore, termination of the Agreement would be effective as of July 6, 2022. The Company disputes Janssen's assertions and allegations, including Janssen's ability to effect termination pursuant to the Janssen Notice. The Company and Janssen disagree on the monetary amounts that are due to the Company as a result of termination by any means. The Company believes the amounts due to the Company include, but are not limited to, compensation for services provided, reimbursement for raw materials purchased and non-cancelable orders, and fees for early termination. Janssen has alleged that no additional amount is due to the Company and that the Company should pay Janssen an unspecified amount as a result of the Company's alleged failure to perform under the Agreement. The Company has not recorded any contingent liabilities related to Janssen's allegations as the Company believes they are without merit and intends to vigorously defend the Company's position during the dispute resolution process through arbitration. During the three months ended June 30, 2023, there were no impacts on previously recognized revenue or depreciation related to the conclusion of the Agreement. As of June 30, 2023, the Company has no billed or unbilled net accounts receivable related to the Agreement. Beginning in the fourth quarter of 2022, because the arbitration process is expected to extend longer than one year, the Company reclassified amounts related to the Janssen Agreement from "Inventories, net" and from "Prepaid expenses and other current assets" to "Other assets", resulting in $152.7 million in long-term assets related to the Janssen Agreement on the Condensed Consolidated Balance Sheet as of December 31, 2022. The long-term asset balance within "Other Assets" related to the Agreement as of June 30, 2023 was $154.0 million. These assets include termination penalties, certain inventory related items and raw materials inventory representing materials purchased for the Agreement which Janssen has not reimbursed. The Company evaluated the net realizable value of the inventory as of June 30, 2023, concluding that because the Agreement specifies the Company is entitled to, among other things, reimbursement of raw materials and non-cancelable orders in the event of a contract termination for any reason, the Company is entitled to payment from Janssen for these raw materials. Additionally, the Company has $5.2 million of non-cancelable orders as of June 30, 2023 which have not been received and Janssen has not reimbursed. CDMO operating leases Certain multi-year CDMO service arrangements with commercial customers include operating leases whereby the customer has the right to direct the use of and obtain substantially all of the economic benefits of specific manufacturing suites operated by the Company. The associated revenue is recognized on a straight-line basis over the term of the lease. The weighted average remaining term on the Company's operating lease components approximates 3.2 years. The Company utilizes a cost-plus model to determine the stand-alone selling price of the lease component to allocate contract consideration between the lease and non-lease components. Excluding future amounts related to the Agreement as discussed above, the Company estimates future operating lease revenues to be $0.6 million in the remainder of 2023, $0.9 million in 2024, $0.9 million in 2025, $0.9 million in 2026, $0.9 million in 2027 and $0.9 million in years beyon d 2027. Transaction price allocated to remaining performance obligations As of June 30, 2023, the Company has future contract value on unsatisfied performance obligations of approximately $452.0 million associated with all arrangements entered into by the Company. The Company expects to recognize $443.2 million of unsatisfied performance obligations within the next 24 months. The amount and timing of revenue recognition for unsatisfied performance obligations can change. The future revenues associated with unsatisfied performance obligations exclude the value of unexercised option periods in the Company’s revenue arrangements. Often the timing of manufacturing activities changes based on customer needs and resource availability. Government funding appropriations can impact the timing of product deliveries. The success of the Company's development activities that receive development funding support from the USG under development contracts can also impact the timing of revenue recognition. Contract assets The Company considers accounts receivable and deferred costs associated with revenue generating contracts, which are not included in inventory or property, plant and equipment and that the Company does not currently have a contractual right to bill, to be contract assets. As of June 30, 2023 and December 31, 2022, the Company had $30.3 million an d $34.8 million, respectively, of contract assets recorded within "Accounts receivable, net" on the Condensed Consolidated Balance Sheets. Contract liabilities When performance obligations are not transferred to a customer at the end of a reporting period, cash received associated with amounts allocated to those performance obligations is reflected as contract liabilities on the Condensed Consolidated Balance Sheets and is deferred until control of these performance obligations is transferred to the customer. The following table presents the roll forward of the contract liability balances:
|  | Contract Liabilities
Balance at December 31, 2022 |  | $ | 31.7 |
Balance at June 30, 2023 |  | $ | 19.3 |
Revenue recognized in the period from amounts included in contract liability at the beginning of the period: |  | $ | (6.8) |
As of June 30, 2023 and December 31, 2022, the current portion of contract liabilities was $14.3 million and $26.4 million, respectively, and was included in "Other current liabilities" on the Condensed Consolidated Balance Sheets. Accounts receivable and allowance for expected credit losses Accounts receivable, including unbilled accounts receivable contract assets, consist of the following:
|  | June 30, 2023 |  | December 31, 2022
Accounts receivable: |  |  |  |
Billed |  | $ | 238.5 |  |  | $ | 102.7 |
Unbilled |  | 51.8 |  |  | 56.4 |
Allowance for expected credit losses |  | (0.2) |  |  | (0.7) |
Accounts receivable, net |  | $ | 290.1 |  |  | $ | 158.4 |
We maintain an allowance for expected credit losses, which represents the estimated aggregate amount of credit risk arising from the inability or unwillingness of specific customers to pay our fees or disputes that may affect our ability to fully collect our billed accounts receivable. We estimate the current-period provision for expected credit losses on a specific identification basis and we consider factors such as the age of the receivables balance, knowledge of the specific customers' circumstances and historical collection experience for similar customers. Accounts receivable, net of the allowance for expected credit losses, represents the amount we expect to collect. Our actual experience may vary from our estimates. At each reporting date, we adjust the allowance for expected credit losses to reflect our current estimate.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 9 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-9 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 10 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-10 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-15 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Subparagraph (b)(2) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-13 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 606 -Publisher FASB -URI https://asc.fasb.org//606/tableOfContent + Details
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