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Note 2 - Revenue Recognition
 6 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

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.

 

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.

 

The Company also generates revenue from short-term rentals under operating leases of its manufactured products.  Rentals of the Company’s equipment generally range from daily rentals to minimum rental periods of up to one year.  Rental revenue is recognized within the scope of ASC 842, Leases ("ASC 842").   The Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions.  In accordance with ASC 842, rental revenue is recognized as earned over the rental period if collectability of the rent is reasonably assured.  When collectability of amounts are no longer probable the Company records a direct write-off of the rent receivable to rental revenue and limits future rental revenue recognition to cash received.  During the second quarter of fiscal year 2025, the Company determined the collectibility of receivables from a rental customer was less than probable.  As a result of this determination, the rent receivable balance due from this customer of $2.2 million was reversed against rental revenue.  As a result of reversal, the Company's consolidated rental revenue for the three ended March 31, 2025 was in a negative position ($0.7 million).  Any future cash received from this customer will be recognized as rental revenue.    

 

At March 31, 2025 and September 30, 2024, the Company had no deferred contract liabilities.  At  March 31, 2025 and September 30, 2024, the Company had deferred contract costs of $0.2 million, and zero, respectively.  During the three and six months ended March 31, 2025, no revenue was recognized from deferred contract liabilities and no cost of revenue was recognized from deferred contract costs.  For each of the three and six months ended March 31, 2024, revenue of $1.0 million was recognized from deferred contract liabilities.  During the three and six months ended March 31, 2024, no cost of revenue was recorded from deferred contract costs.  At March 31, 2025, all contracts had an original expected duration of one year or less.  At March 31, 2025 and October 1, 2024, the Company had accounts receivable from contracts with customers of $13.2 million and $12.6 million, respectively.  At March 31, 2024 and October 1, 2023, the Company had accounts receivable from contracts with customers of $12.5 million and $11.1 million, respectively.  Accounts receivable from contracts with customers excludes accounts receivable from rental contracts.

 

For the three and six months ended March 31, 2025, no revenue recognized from contracts with customers satisfied over-time.  For each of the three and six months ended March 31, 2024, revenue from contracts with customers satisfied over-time was $1.0 million, which was from the Company's Intelligent Industrial segment.  All other revenue from contracts with customers was recognized at a point-in time.  For each of the Company’s operating segments, the following table presents revenue (in thousands) only from the sale of products and the performance of services under contracts with customers.  Therefore, the table excludes all revenue earned from rental contracts.

 

  

Three Months Ended

  

Six Months Ended

 
  

March 31, 2025

  

March 31, 2024

  

March 31, 2025

  

March 31, 2024

 

Smart Water

 $9,472  $6,411  $16,760  $10,645 

Energy Solutions

  3,399   6,380   23,225   40,086 

Intelligent Industrial

  5,837   6,706   11,368   12,480 

Total

 $18,708  $19,497  $51,353  $63,211 

 

See Note 12 for more information on the Company’s operating business 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

  

Six Months Ended

 
  

March 31, 2025

  

March 31, 2024

  

March 31, 2025

  

March 31, 2024

 

Asia (including Russian Federation)

 $1,811  $3,672  $19,868  $35,888 

Canada

  626   1,002   995   2,228 

Europe

  1,190   1,507   2,588   2,885 

Mexico

  811   204   2,092   370 

United States

  14,002   12,831   25,425   21,249 

Other

  268   281   385   591 

Total

 $18,708  $19,497  $51,353  $63,211 

 

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.