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Note 2 - Revenue Recognition
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

2. REVENUE RECOGNITION

 

We recognize revenues when the transfer of promised goods or services are delivered to our customers in accordance with the applicable customer contract and we are entitled to be paid by the customer. Revenues are measured as consideration specified in the contract and exclude any sales incentives and amounts collected on behalf of third parties. Certain contracts may include multiple goods or services such as the usage of equipment and delivery of field support services that are bundled into an all-in price to the customer for each gallon of LNG delivered. Revenue recognition under these contracts requires significant judgment by the Company in order to determine the appropriate accounting for these transactions, including whether performance obligations should be accounted for separately versus together, how the price should be allocated among the performance obligations, and when to recognize revenue for each performance obligation. The Company has determined that these contracts have multiple performance obligations and the Company allocates the contract price to each performance obligation using its best estimates of the respective standalone selling price of each distinct good or service at the time the contract was negotiated.

 

Revenues from contracts with customers are disaggregated into (1) LNG Product (2) rental (3) service and (4) other.

 

LNG Product revenues

 

LNG Product revenues represent the sale of LNG from both produced and purchased sources as well as the transportation performed to deliver the LNG to our customers' locations. LNG Product revenues are recognized upon delivery of the LNG to the customer, at which point the customer controls the product and the Company has an unconditional right to payment. The Company acts as a principal when using third party transportation companies and therefore recognizes the gross revenue for the supply of LNG. The Company does not differentiate between the revenue from the sale of LNG production and purchased LNG as the criteria for revenue recognition are identical. Some of our contracts contain minimum take-or-pay amounts where a customer has agreed to source a minimum volume of LNG under the contract. Take or pay revenues are only recognized when the customer has failed to take the minimum contracted volumes upon completion of the time period specified within the contract and the Company has the unconditional right to receive payment for the take or pay amount. Certain of our sales contracts contain provisions that may meet the criteria of a derivative in the event delivery is not made. These contracts are accounted for under the normal purchase normal sales exclusion under U.S. GAAP and are not measured at fair value each reporting period. Our LNG contracts are generally one to 24 months in duration.

 

Rental revenues

 

Rental revenues are generated from the rental of cryogenic equipment to our customers. Revenues related to rental of equipment are recognized under Topic 606 and not ASC 842: Leases, as the Company maintains control of the equipment that the customer uses and can replace the rented equipment with similar equipment should the rented equipment become inoperable or the Company chooses to replace the equipment for maintenance purposes. Rental revenues based upon day rates or monthly rates for the use of equipment as specifically established within the contract are recognized as the rental period is completed and for periods that cross month end, revenue is recognized for the portion of the rental period that has been completed to date. Performance obligations for rental revenue are considered to be satisfied as the rental period is completed based upon the terms of the related contract. Rental revenues from contracts with bundled pricing are based upon the fair value of the pricing components at the time the contract was negotiated and are recognized when the performance obligation has been satisfied in accordance with the contract. The stated rental rates within each contract are representative of the stand-alone rental rates at the time the contract was negotiated.

 

Service revenues

 

Service revenues are generated from engineering and field support services and represent the human resources provided to the customer to support the use of LNG at the customer’s job site. These include support and costs for mobilization and demobilization of equipment at customer sites as well as onsite technical support while customers are consuming LNG. Service revenues that are not dependent upon the gallons delivered or rental period but based upon the specific contractual terms and can be based on an event (i.e. mobilization or demobilization) or an hourly rate as specifically established within the contract and are recognized as the event is completed or work is done. Service revenues from contracts with bundled pricing are based upon the fair value of the pricing components at the time the contract was negotiated and are recognized when the performance obligation has been satisfied in accordance with the contract. The stated hourly labor rates in each contract are representative of the stand-alone hourly rates at the time the contract was negotiated.

 

Other revenues

 

Other revenues are items that, due to their nature, are disaggregated from the categories mentioned above such as expenses incurred by the Company on behalf of the customer that we contractually rebill to our customers on a cost-plus basis. 

 

Disaggregated revenues

 

The table below presents revenue disaggregated by source, for the three and six months ended June 30, 2024 and 2023 (in thousands):

 

   

Three Months Ended

    

Six Months Ended

  
   

June 30,

    

June 30,

  

Revenues:

  

2024

    

2023

    

2024

    

2023

  

LNG Product

   $ 14,626     $ 10,568     $ 30,039     $ 32,473  

Rental

     1,682       1,063       3,855       3,310  

Service

     1,693       1,100       3,617       3,166  

Other

     597       176       857       800  

Total revenues

   $ 18,598     $ 12,907     $ 38,368     $ 39,749  

 

The table below presents revenue disaggregated by geographic location, for the three and six months ended June 30, 2024 and 2023 (in thousands):

 

   

Three Months Ended

    

Six Months Ended

  
   

June 30,

    

June 30,

  

Revenues:

  

2024

    

2023

    

2024

    

2023

  

United States

   $ 17,373     $ 11,162     $ 35,880     $ 35,185  

Mexico

     1,225       1,745       2,488       4,564  

Total revenues

   $ 18,598     $ 12,907     $ 38,368     $ 39,749  

 

Variable and other Revenue Components

 

Certain of our contracts may include rental or service components at stated rates within the contract that vary depending on customer demand and are satisfied as the work is authorized by the customer and performed by the Company. Additionally, LNG product sales agreements may include both fixed and variable fees per gallon of LNG but are representative of the stand-alone selling price for LNG at the time the contract was negotiated. We have concluded that the variable LNG fees meet the exception for allocating variable consideration to specific parts of the contract. As such, the variable consideration for these contracts is allocated to each distinct gallon of LNG and recognized when that distinct gallon of LNG is delivered to the customer.

 

Taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions between the Company and its customers, such as sales, use and value-added taxes, are excluded from revenue.

 

During the fourth quarter of 2023, the Company entered into a two-year marine bunkering contract with a new customer which represents approximately 34% of the Company's revenue for both the three and the six months ended June 30, 2024.