3. Revenue from Contracts with Customers

Disaggregation of Revenue

The table below presents the Company’s revenues disaggregated by type of services performed.


	Three Months Ended March 31,
	2025		2024
Software revenue	$	30,938	$	29,688
Payment revenue		75,940		75,202
Services revenue		1,064		708
Total revenues	$	107,942	$	105,598

Contract Assets and Liabilities

The Company’s rights to payments are not conditional on any factors other than the passage of time, and as such, the Company does not have any contract assets. Contract liabilities consist primarily of advance cash receipts for services (deferred revenue) and are recognized as revenue when the services are provided.

The table below presents information on accounts receivable and contract liabilities.


	As of March 31, 2025		As of December 31, 2024
Trade accounts receivable, net	$	20,719	$	19,989
Payment processing receivable, net		32,720		31,682
Accounts receivable, net	$	53,439	$	51,671
Contract liabilities	$	25,817	$	25,823

Significant changes in the contract liabilities balance are as follows:


	Three Months Ended March 31,
	2025			2024
Revenue recognized included in beginning of period balance	$	(3,047	)	$	(3,473	)
Cash received, excluding amounts recognized as revenue during the period		3,041			2,143

The tables below present a summary of changes in the Company’s allowances for credit losses and returns for the three months ended March 31, 2025 and 2024:


	Accounts Receivable
	Allowance for Credit Losses			Allowance for Returns		Supplier Advances Receivable Allowance
Allowance balance, December 31, 2024	$	2,498		$	1,781	$	1,644
Amounts charged to contra revenue, cost of revenues and expenses		250			1		404
Amounts written off as uncollectable		(294	)		-		(602	)
Recoveries of amounts previously written off		-			-		147
Deduction released to revenue		-			-		-
Allowance balance, March 31, 2025	$	2,454		$	1,782	$	1,593


	Accounts Receivable
	Allowance for Credit Losses			Allowance for Returns			Supplier Advances Receivable Allowance
Allowance balance, December 31, 2023	$	2,142		$	2,089		$	1,333
Amounts charged to contra revenue, cost of revenues and expenses		254			(200	)		86
Amounts written off as uncollectable		(14	)		-			(475	)
Recoveries of amounts previously written off		-			-			347
Deduction released to revenue		-			-			-
Allowance balance, March 31, 2024	$	2,382		$	1,889		$	1,291

Transaction Price Allocated to Remaining Performance Obligations

Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized. These revenues are subject to future economic risks including customer cancellations, bankruptcies, regulatory changes and other market factors.

The Company applies the practical expedient in ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), paragraph 606-10-50-14(b) and does not disclose information about remaining performance obligations related to transaction and processing services that qualify for recognition in accordance with paragraph 606-10-55-18 of Topic 606. These contracts contain variable consideration for stand-ready performance obligations for which the exact quantity and mix of transactions to be processed are contingent upon buyer or supplier request. These contracts also contain fixed fees and non-refundable upfront fees; however, these amounts are not considered material to total consolidated revenue.

The Company’s remaining performance obligation consists of contracts with financial institutions who are using the ASCEND solution. These contracts generally have a duration of two to five years and contain fixed maintenance fees that are considered fixed price guarantees. Remaining performance obligation consisted of the following:


	Current		Noncurrent		Total
As of March 31, 2025	$	15,223	$	19,771	$	34,994
As of December 31, 2024		15,805		20,946		36,751

Contract Costs

The Company incurs incremental costs to obtain a contract, as well as costs to fulfill a contract with buyer customers that are expected to be recovered. These costs consist primarily of sales commissions incurred if a contract is obtained, and customer implementation related costs.

The Company utilizes a portfolio approach when estimating the amortization of contract acquisition and fulfillment costs. These costs are amortized on a straight-line basis over the expected benefit period of generally five years, which was determined by taking into consideration customer attrition rates, estimated terms of customer relationships, useful lives of technology, industry peers, and other factors. The amortization of contract fulfillment costs associated with implementation activities are recorded as cost of revenues in the Company's unaudited consolidated statements of operations. The amortization of contract acquisition costs associated with sales commissions that qualify for capitalization is recorded as sales and marketing expense in the Company’s unaudited consolidated statements of operations. Costs to obtain or fulfill a contract are classified as deferred customer origination costs in the Company’s unaudited consolidated balance sheets.

The following tables present information about deferred contract costs:


	Three Months Ended March 31,
	2025		2024
Capitalized sales commissions and implementation costs	$	3,154	$	2,653
Amortization of deferred contract costs
Costs to obtain contracts included in sales and marketing expense	$	1,761	$	1,551
Costs to fulfill contracts included in cost of revenue	$	1,374	$	1,549

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-12

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org/606/tableOfContent

+ Details

AvidXchange Holdings, Inc. 10-Q