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.

The Company also recognizes subscription and support revenue from the sales of its subscription and support-based Heartbeat Detector®.  Subscription and support contracts are typically for one to five years.  Subscriptions and support revenue is recognized over time as the services are performed. 

The Company occasionally recognizes revenue from contracts throughout the manufacturing or service process, even prior to delivery of the completed product or service to the customer.  This overtime recognition of revenue requires that either (i) the customer simultaneously receives and consumes the economic benefits the Company provides, (ii) the Company creates or enhances an asset controlled by the customer or (iii) the Company’s performance does not create an asset for which it has an alternative use and has an enforceable right to payment for performance completed to date.

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 collectability 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.  Any future cash received from this customer will be recognized as rental revenue.    

At June 30, 2026, and September 30, 2025, the Company had deferred contract liabilities and deferred contract assets of $11.4 million and zero, respectively.  The Company had no deferred contract liabilities or deferred contract assets at  September 30, 2025 and October 1, 2024.  During the three and nine months ended June 30, 2026 and 2025, no revenue or cost of revenue was recognized from deferred contract costs or deferred contract asset.  At June 30, 2026 and October 1, 2025, the Company had accounts receivable from contracts with customers of $5.7 million and $11.4 million, respectively.  At June 30, 2025 and October 1, 2024, the Company had accounts receivable from contracts with customers of $12.4 million and $12.6 million, respectively.  Accounts receivable from contracts with customers exclude accounts receivable from rental contracts.

For the three and nine months ended June 30, 2026 revenue of $2.1 million and $6.1 million, respectively, was recognized from contracts with customers satisfied over-time, which was from the Company's Energy Solutions segment. For the three and nine months ended June 30, 2025 revenue of $0.5 million and $0.7 million, respectively, was recognized from contracts with customers satisfied over-time. 

At June 30, 2026, the aggregate amount of transaction price allocation to unsatisfied performance obligations on contracts with a duration in excess of one year was approximately $98 million.  The majority of these unsatisfied performance obligations are expected to be fulfilled by the third quarter of fiscal year 2027.  Revenue from these contracts are expected to be recognized over-time utilizing the cost-to-cost method.  All other revenue from contracts with customers are being recognized at a point-in time and have a duration of one year or less.  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.

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:

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.