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Equipment Financing Receivables and Allowance for Credit Losses | 9 Months Ended
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Sep. 30, 2024
Equipment Financing Receivables and Allowance for Credit Losses |
Equipment Financing Receivables and Allowance for Credit Losses | 5. Equipment Financing Receivables and Allowance for Credit Losses Our equipment financing receivables balance consists of sales-type leases arising from lease financing of cloud telecommunication equipment (IP or cloud telephone desktop devices) bundled and sold with our cloud telecommunications services. The majority of our leases that qualify as sales-type leases are non-cancelable and include cancellation penalties approximately equal to the full value of the lease receivables. Revenue from sales-type leases is recognized upon installation and the interest portion is deferred and recognized as earned. These receivables are typically collateralized by a security interest in the underlying equipment. Equipment financing receivables were as follows (in thousands):
|  | September 30, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Gross equipment financing receivables |  | $ | 4,916 |  |  | $ | 3,888 |
Less: unearned income |  |  | (1,492 | ) |  |  | (1,093 | )
Less: allowance for credit losses |  |  | (215 | ) |  |  | (171 | )
Equipment financing receivables, net |  | $ | 3,209 |  |  | $ | 2,624 |
Current equipment financing receivables, net |  | $ | 981 |  |  | $ | 856 |
Long-term equipment financing receivables, net |  |  | 2,228 |  |  |  | 1,768 |
Equipment financing receivables, net |  | $ | 3,209 |  |  | $ | 2,624 |
A summary of our gross equipment financing receivables’ future contractual maturities, is as follows (in thousands):
Year ending December 31, |  |  |
2024 remaining |  | $ | 467 |
2025 |  |  | 1,608 |
2026 |  |  | 1,247 |
2027 |  |  | 899 |
2028 |  |  | 533 |
2029 and thereafter |  |  | 162 |
Total |  | $ | 4,916 |
Allowance for Credit Losses The allowance for credit losses was as follows (in thousands):
Balance at December 31, 2023 |  | $ | 171 |
Provision |  |  | 22 |
Write-offs |  |  | (13 | )
Recoveries and other |  |  | - |
Balance at March 31, 2024 |  | $ | 180 |
Provision |  |  | 23 |
Write-offs |  |  | (9 | )
Recoveries and other |  |  | - |
Balance at June 30, 2024 |  | $ | 194 |
Provision |  |  | 27 |
Write-offs |  |  | (6 | )
Recoveries and other |  |  | - |
Balance at September 30, 2024 |  | $ | 215 |
Aging of Receivables The aging of gross equipment financing receivables was as follows (in thousands):
|  | September 30, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Past due amounts 0 - 90 days |  | $ | 3,209 |  |  | $ | 2,623 |
Past due amounts > 90 days |  |  | - |  |  |  | 1 |
Total |  | $ | 3,209 |  |  | $ | 2,624 |
Our equipment financing receivable portfolio is primarily in the United States. The allowance for credit losses is determined principally based on an assessment of origination year and past collection experience as well as consideration of current and future economic conditions and changes in our customer collection trends. Based on that assessment, the allowance for credit losses as a percent of gross equipment financing receivables (net of unearned income) increased to 6.3% at September 30, 2024 from 6.1% at December 31, 2023. The allowance for credit losses represents an estimate of the losses expected to be incurred from the Company's equipment financing receivable portfolio. The projected loss rates are primarily based upon historical loss experience adjusted for judgments about the probable effects of relevant observable data including current and future economic conditions as well as delinquency trends, resolution rates, and the aging of receivables. The allowance for credit losses for equipment finance receivables is inherently more difficult to estimate than the allowance for trade receivables because the underlying lease portfolio has an average maturity, at any time, of approximately three to five years and contains unbilled amounts. We consider all available information in our quarterly assessments of the adequacy of the allowance for credit losses. We believe our estimates, including any qualitative adjustments, are reasonable and have considered all reasonably available information about past events, current conditions, and reasonable and supportable forecasts of future events and economic conditions. The identification of account-specific exposure is not a significant factor in establishing the allowance for credit losses for equipment finance receivables. We continue to monitor developments in future economic conditions and trends, and as a result, our reserve may need to be updated in future periods. The table below shows gross equipment financing receivables and current period gross write offs by year of origination (in thousands):
|  | September 30, 2024 |  |  | December 31, 2023 |
|  | 2024 |  |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Total Equipment Financing Receivables |  |  | Total Equipment Financing Receivables |
United States |  | $ | 1,378 |  |  |  | 1,267 |  |  |  | 571 |  |  |  | 113 |  |  |  | 92 |  |  |  | 3 |  |  | $ | 3,424 |  |  | $ | 2,795 |
Current period gross write offs |  | $ | - |  |  |  | 6 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  | $ | 6 |  |  | $ | 33 |

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