CONTRACT BALANCES
The changes in the allowance for credit losses during the years ended December 31, 2025, 2024 and 2023, were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Balance, beginning of period | $ | 15,301 | | | $ | 13,768 | | | $ | 9,277 | |
Add: provision for credit losses | 43,271 | | | 45,614 | | | 40,702 | |
| Less: write-offs, net of recoveries | (44,790) | | | (44,081) | | | (36,211) | |
| Balance, end of period | $ | 13,782 | | | $ | 15,301 | | | $ | 13,768 | |
In calculating the allowance for credit losses as of December 31, 2025, 2024 and 2023, the Company considered expectations of probable credit losses based on observed trends in cancellations, observed changes in the credit risk of specific customers, the impact of anticipated closures and bankruptcies using forecasted economic indicators in addition to historical experience and loss patterns during periods of macroeconomic uncertainty. The decrease in the provision for credit losses and write-offs, net of recoveries in the year ended December 31, 2025 as compared to the prior-year period was a result of lower aggregate customer delinquencies, while the increase in the year ended December 31, 2024 as compared to the prior-year period was primarily driven by the ordinary course of business, reflecting the increase in net revenue as well as higher aggregate customer delinquencies.
Contract liabilities consist of deferred revenue, which is recorded on the consolidated balance sheets when the Company has received consideration, or has the right to receive consideration, in advance of transferring the performance obligations under the contract to the customer.
The changes in short-term deferred revenue during the years ended December 31, 2025 and 2024 were as follows (in thousands):
| | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 |
| Balance, beginning of period | $ | 2,973 | | | $ | 3,821 | |
| Less: recognition of deferred revenue from beginning balance | (2,784) | | | (3,527) | |
| Add: net increase in current period contract liabilities | 5,656 | | | 2,679 | |
| Balance, end of period | $ | 5,845 | | | $ | 2,973 | |
The majority of the Company’s deferred revenue balance as of December 31, 2025 is classified as short-term and is expected to be recognized as revenue in the subsequent three-month period ending March 31, 2026. An immaterial amount of long-term deferred revenue is included in other long-term liabilities as of December 31, 2025. No other contract assets or liabilities were recorded on the Company’s consolidated balance sheets as of December 31, 2025 and 2024.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.