Washington, D.C. 20549

(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended December 31, 2019
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from   to
Commission File Number: 1-12997
(Exact name of registrant as specified in its charter)
Virginia 54-1000588
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
1891 Metro Center Drive, Reston, Virginia
(Address of principal executive offices) (Zip Code)
(703) 251-8500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueMMSNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 
As of February 3, 2020, there were 63,943,497 shares of the registrant’s common stock (no par value) outstanding.

Quarterly Report on Form 10-Q
For the Quarter Ended December 31, 2019
Item 1. 
Item 2. 
Item 3. 
Item 4. 
Item 1.
Item 1A. 
Item 2.
Item 6. 

Throughout this Quarterly Report on Form 10-Q, the terms “Company,” “we,” “us,” “our” and “MAXIMUS” refer to MAXIMUS, Inc. and its subsidiaries, unless the context requires otherwise.
Included in this Quarterly Report on Form 10-Q are forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “opportunity,” “could,” “potential,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
a failure to meet performance requirements in our contracts, which might lead to contract termination and actual or liquidated damages;
the effects of future legislative or government budgetary and spending changes;
our failure to successfully bid for and accurately price contracts to generate our desired profit;
our ability to maintain technology systems and otherwise protect confidential or protected information;
our ability to attract and retain executive officers, senior managers and other qualified personnel to execute our business;
our ability to manage capital investments and startup costs incurred before receiving related contract payments;
our ability to manage our growth, including acquired businesses;
the ability of government customers to terminate contracts on short notice, with or without cause;
our ability to maintain relationships with key government entities from whom a substantial portion of our revenue is derived;
the outcome of reviews or audits, which might result in financial penalties and impair our ability to respond to invitations for new work;
a failure to comply with laws governing our business, which might result in the Company being subject to fines, penalties, suspension, debarment and other sanctions;
the costs and outcome of litigation;
difficulties in integrating or achieving projected revenues, earnings and other benefits associated with acquired businesses;
the effects of changes in laws and regulations governing our business, including tax laws, and applicable interpretations and guidance thereunder, or changes in accounting policies, rules, methodologies and practices, and our ability to estimate the impact of such changes;
matters related to business we have disposed of or divested; and
other factors set forth in Exhibit 99.1, under the caption "Special Considerations and Risk Factors," in our Annual Report on Form 10-K for the year ended September 30, 2019, which was filed with the Securities and Exchange Commission on November 26, 2019.
Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Item 1. Consolidated Financial Statements.
(Amounts in thousands, except per share data)
 Three Months Ended December 31,
Revenue$818,229  $664,619  
Cost of revenue642,779  505,354  
Gross profit175,450  159,265  
Selling, general and administrative expenses87,227  79,671  
Amortization of intangible assets9,088  5,458  
Operating income79,135  74,136  
Interest expense484  625  
Other income, net719  2,045  
Income before income taxes79,370  75,556  
Provision for income taxes20,636  19,833  
Net income58,734  55,723  
Loss attributable to noncontrolling interests  (190) 
Net income attributable to MAXIMUS$58,734  $55,913  
Basic earnings per share$0.91  $0.86  
Diluted earnings per share$0.91  $0.86  
Dividends paid per share$0.28  $0.25  
Weighted average shares outstanding:  
Basic64,597  64,827  
Diluted64,758  64,977  

See notes to unaudited consolidated financial statements.

(Amounts in thousands)
 Three Months Ended December 31,
Net income$58,734  $55,723  
Foreign currency translation adjustments6,893  (5,720) 
Comprehensive income65,627  50,003  
Comprehensive loss attributable to noncontrolling interests  (190) 
Comprehensive income attributable to MAXIMUS$65,627  $50,193  

See notes to unaudited consolidated financial statements.

(Amounts in thousands)
 December 31,
September 30,
Current assets:  
Cash and cash equivalents$149,515  $105,565  
Accounts receivable — billed and billable, net of reserves of $6,846 and $5,382
511,670  476,690  
Accounts receivable — unbilled123,420  123,884  
Income taxes receivable6,049  20,805  
Prepaid expenses and other current assets53,254  62,481  
Total current assets843,908  789,425  
Property and equipment, net92,377  99,589  
Capitalized software, net32,936  32,369  
Operating lease right-of-use assets200,690  —  
Goodwill586,659  584,469  
Intangible assets, net171,077  179,250  
Deferred contract costs, net18,224  18,921  
Deferred compensation plan assets35,151  32,908  
Deferred income taxes191  186  
Other assets8,578  8,615  
Total assets$1,989,791  $1,745,732  
Current liabilities:  
Accounts payable and accrued liabilities$174,707  $177,786  
Accrued compensation and benefits104,263  106,789  
Deferred revenue42,756  43,344  
Income taxes payable5,563  13,952  
Current portion of long-term debt and other borrowings7,009  9,658  
Operating lease liabilities85,625  —  
Other liabilities12,785  12,709  
Total current liabilities432,708  364,238  
Deferred revenue, less current portion32,105  32,341  
Deferred income taxes47,344  46,560  
Deferred compensation plan liabilities, less current portion37,298  34,079  
Operating lease liabilities, net of current portion121,620  —  
Other liabilities19,711  20,313  
Total liabilities690,786  497,531  
Shareholders’ equity:  
Common stock, no par value; 100,000 shares authorized; 63,953 and 63,979 shares issued and outstanding at December 31, 2019, and September 30, 2019, at stated amount, respectively
504,184  498,433  
Accumulated other comprehensive loss(38,487) (45,380) 
Retained earnings833,308  794,739  
Total MAXIMUS shareholders' equity1,299,005  1,247,792  
Noncontrolling interests  409  
Total equity1,299,005  1,248,201  
Total liabilities and equity$1,989,791  $1,745,732  
See notes to unaudited consolidated financial statements.

(Amounts in thousands)
 Three Months Ended December 31,
Cash flows from operations:  
Net income$58,734  $55,723  
Adjustments to reconcile net income to cash flows from operations:  
Depreciation and amortization of property and equipment and
capitalized software
15,318  11,231  
Amortization of intangible assets9,088  5,458  
Deferred income taxes422  16,511  
Stock compensation expense5,397  4,971  
Change in assets and liabilities net of effects of business combinations  
Accounts receivable — billed and billable(31,016) (69,890) 
Accounts receivable — unbilled2,013  20,198  
Prepaid expenses and other current assets4,063  (5,691) 
Deferred contract costs848  (1,757) 
Accounts payable and accrued liabilities2,403  26,564  
Accrued compensation and benefits6,842  377  
Deferred revenue(1,345) (372) 
Income taxes13,984  (3,848) 
Operating lease right-of-use assets and liabilities(1,622) —  
Other assets and liabilities2,138  (135) 
Cash flows from operations87,267  59,340  
Cash flows from investing activities:  
Purchases of property and equipment and capitalized software costs(10,487) (9,973) 
Acquisitions of businesses, net of cash acquired  (421,809) 
Maturities of short-term investments  19,996  
Other25  47  
Cash used in investing activities(10,462) (411,739) 
Cash flows from financing activities:  
Cash dividends paid to MAXIMUS shareholders(17,913) (16,033) 
Purchases of MAXIMUS common stock(1,898) (40,984) 
Tax withholding related to RSU vesting(10,614) (8,915) 
Borrowings under credit facility and other loan agreements83,419  195,100  
Repayment of credit facility and other long-term debt(86,301) (70,033) 
Other(493) (133) 
Cash (used in)/provided by financing activities(33,800) 59,002  
Effect of exchange rate changes on cash and cash equivalents1,452  (1,068) 
Net increase/(decrease) in cash, cash equivalents and restricted cash44,457  (294,465) 
Cash, cash equivalents and restricted cash, beginning of period116,492  356,559  
Cash, cash equivalents and restricted cash, end of period$160,949  $62,094  

See notes to unaudited consolidated financial statements.

(Amounts in thousands)
Noncontrolling interestTotal
Balance at September 30, 201963,979  $498,433  $(45,380) $794,739  $409  $1,248,201  
Net income—  —  —  58,734  —  58,734  
Foreign currency translation—  —  6,893  —  —  6,893  
Cash dividends—  —  —  (17,913) (409) (18,322) 
Dividends on RSUs—  354  —  (354) —    
Purchases of common stock(26) —  —  (1,898) —  (1,898) 
Stock compensation expense—  5,397  —  —  —  5,397  
Balance at December 31, 201963,953  $504,184  $(38,487) $833,308  $  $1,299,005  

Noncontrolling interestTotal
Balance at September 30, 201864,371  $487,539  $(36,953) $633,281  $2,552  $1,086,419  
Cumulative impact from adopting ASC Topic 606 on October 1, 2018—  —  —  32,929  553  33,482  
Net income—  —  —  55,913  (190) 55,723  
Foreign currency translation—  —  (5,720) —  —  (5,720) 
Cash dividends—  —  —  (16,033) (133) (16,166) 
Dividends on RSUs—  428  —  (428) —    
Purchases of common stock(654) —  —  (41,330) —  (41,330) 
Stock compensation expense—  4,971  —  —  —  4,971  
Balance at December 31, 201863,717  $492,938  $(42,673) $664,332  $2,782  $1,117,379  

See notes to unaudited consolidated financial statements.


Notes to Unaudited Consolidated Financial Statements
For the Three Months Ended December 31, 2019 and 2018

1. Organization and Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. As permitted by these instructions, they do not include all of the information and notes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three months ended December 31, 2019, are not necessarily indicative of the results that may be expected for the full fiscal year. The balance sheet at September 30, 2019, has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expenses. On an ongoing basis, we evaluate our estimates including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill and amounts related to income taxes, certain accrued liabilities and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
These financial statements should be read in conjunction with the consolidated audited financial statements and the notes thereto at September 30, 2019 and 2018, and for each of the three years ended September 30, 2019, included in our Annual Report on Form 10-K which was filed with the Securities and Exchange Commission on November 26, 2019.
Changes in financial reporting
Effective October 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842). The new standard requires that assets and liabilities arising under leases be recognized on the balance sheet, except for those with an initial term of less than 12 months. We adopted this standard using a modified retrospective approach. Accordingly, we did not recast prior period financial information. Certain elections were made in adopting the standard.
We elected to use the package of practical expedients which, among other things, allows us to not reassess historical lease classification.
We do not separate lease and non-lease components for all classes of leases, which allows us to account for a lease as a single component.
We used the optional transition method, which did not require us to recast our comparative periods.
We did not use the hindsight practical expedients, which would have allowed us to use hindsight in determining the reasonably certain lease term.
We did not adjust our accounting for leases with an initial term of twelve months or less.

Upon adopting Topic 842, we recognized a lease liability of $214.5 million, reflecting the present value of the future remaining minimum lease payments. Changes to our opening balance sheet are summarized below. There was no cumulative impact to our retained earnings and the changes did not cause any material changes in our statements of operations or our statements of cash flows. The adoption of Topic 842 does not affect our compliance with our existing contracts, including our credit facility.

(dollars in thousands)Balance at September 30, 2019Adjustments due to adoption of new standardOpening balance at October 1, 2019
Prepaid expenses and other current assets$62,481  $(6,131) $56,350  
Operating lease right-of-use assets—  206,314  206,314  
Liabilities and shareholders' equity
Accounts payable and accrued expenses177,786  (5,250) 172,536  
Operating lease liabilities—  88,276  88,276  
Other current liabilities12,709  (648) 12,061  
Operating lease liabilities, net of current portion—  126,197  126,197  
Other long-term liabilities20,313  (8,392) 11,921  

At the adoption of Topic 842, the Company recognized deferred tax assets and liabilities corresponding to the operating lease liabilities and operating right-of-use assets, respectively. These balances offset each other and no net effect resulted from this change.
Additional information and disclosures relating to this change are included within "Note 3. Leases."
Forthcoming changes
In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This accounting guidance requires customers in cloud-computing arrangements to identify and defer certain implementation costs in a manner broadly consistent with that of existing guidance on the costs to develop or obtain internal-use software. We will adopt this guidance on October 1, 2020. The guidance may be adopted early and we may adopt using either a prospective or retrospective methodology. We are currently assessing the future impact of this update on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update introduces a new model for recognizing credit losses on financial instruments, including losses on accounts receivable. We will adopt this guidance on October 1, 2020 and any changes will be recorded as a cumulative adjustment to retained earnings. We are still assessing the effect of this standard on our financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. This standard will not change the manner in which we would identify a goodwill impairment but would change any subsequent calculation of an impairment charge. We will adopt this guidance on October 1, 2020. The effect of this new standard will depend upon the outcome of future goodwill impairment tests.
Other recent accounting pronouncements are not expected to have a material effect on our financial statements.


2. Segment Information
The table below provides certain financial information for each of our business segments. We operate our business through three segments.
Our U.S. Health and Human Services Segment provides a variety of business process services such as program administration, appeals and assessments services, and related consulting work for U.S. state and local government programs. These services support a variety of programs including the Affordable Care Act (ACA), Medicaid and the Children’s Health Insurance Program (CHIP). We also serve as administrators in state-based welfare-to-work and child support programs.
Our U.S. Federal Services Segment provides business process solutions, including program administration, appeals and assessment services, as well as system and software development and maintenance services for various U.S. federal civilian programs. This segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio and continues to be managed within this segment.
Our Outside the U.S. Segment provides business process solutions for governments and commercial clients outside the U.S., including health and disability assessments, program administration and case management for employment services and other work-support programs. We deliver services in the United Kingdom, including the Health Assessment Advisory Service (HAAS), the Work & Health Programme and Fair Start; Australia, including jobactive and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; Saudi Arabia and Singapore.
 Three Months Ended December 31,
(dollars in thousands)2019% (1)2018% (1)
U.S. Health & Human Services$312,281  $294,213  
U.S. Federal Services366,571  216,987  
Outside the U.S.139,377  153,419  
Total$818,229  $664,619  
Gross profit:    
U.S. Health & Human Services$89,590  28.7 $88,031  29.9 
U.S. Federal Services70,821  19.3 47,985  22.1 
Outside the U.S.15,039  10.8 23,249  15.2 
Total$175,450  21.4 $159,265  24.0 
Selling, general & administrative expense:    
U.S. Health & Human Services$31,398  10.1 $32,139  10.9 
U.S. Federal Services39,239  10.7 26,632  12.3 
Outside the U.S.16,053  11.5 18,808  12.3 
Other (2)537  NM2,092  NM
Total$87,227  10.7 $79,671  12.0 
Operating income:    
U.S. Health & Human Services$58,192  18.6 $55,892  19.0 
U.S. Federal Services31,582  8.6 21,353  9.8 
Outside the U.S.(1,014) (0.7)% 4,441  2.9 
Amortization of intangible assets(9,088) NM(5,458) NM
Other(537) NM(2,092) NM
Total$79,135  9.7 $74,136  11.2 
(1) Percentage of respective segment revenue. Percentages not considered meaningful are marked “NM.”
(2) Other selling, general and administrative expenses includes credits and costs that are not allocated to a particular segment. In the three months ended December 31, 2018, these other costs include $2.7 million of costs related to the acquisition of the citizen engagement centers business.


Identifiable assets for the segments are shown below (in thousands):
December 31, 2019September 30, 2019
U.S. Health & Human Services$584,038  $500,641  
U.S. Federal Services922,613  795,553  
Outside the U.S.245,289  234,769  
Corporate237,851  214,769  
Total$1,989,791  $1,745,732  

3. Leases

Beginning October 1, 2019, we identify contracts which are, or contain, leases where a contract allows us the right to control identified property or equipment for a period of time in return for consideration. Our leases are typically for office space or facilities, as well as some equipment leases. Where contracts include both lease and non-lease components, we do not typically separate the non-lease components in our accounting.
At the inception of a lease, we recognize a liability for future minimum lease payments based upon the present value of those payments.
In identifying our future minimum lease payments, we do not include variable lease costs, such as those for maintenance or utilities. These are recorded as lease expenses in the period in which they are incurred.
In identifying future lease payments, we do not include short-term leases, identified as those with an initial term of twelve months or less.
Lease options are included within our lease liability only where it is reasonably certain that we will utilize those periods of the lease and incur the related costs.
In calculating the fair value of our lease liability, we utilize an estimate of our collateralized incremental borrowing rate. This estimate is based upon publicly-available information adjusted for company-specific, country-specific and lease-specific factors. The weighted average incremental borrowing rate utilized at December 31, 2019 is 3.6%.
Over the course of a lease, the lease liability is reduced as scheduled lease payments are made and increased as the implied interest charges are added.
Our right-of-use asset is based upon the lease liability at the contract inception but is adjusted over the life of the lease by lease prepayments, additional costs or lease incentives. The right-of-use asset is amortized on a straight-line basis over the lease term, offset by the interest accretion recorded on the lease liability.
Lease expense is recorded within our consolidated statements of operations based upon the nature of the assets. Where assets are used to directly serve our customers, such as facilities dedicated to customer contracts, lease costs are recorded in "cost of revenue". Facilities and assets which serve management and support functions are expensed through "selling, general and administrative expenses". Costs recorded in the three months ended December 31, 2019 are summarized below.
(dollars in thousands)Three months ended December 31, 2019
Operating lease cost$25,250  
Short-term lease cost2,110  
Variable lease cost3,334  
Total operating lease costs$30,694  


Future minimum lease payments for noncancelable operating leases as of December 31, 2019 are shown below.
(dollars in thousands)Office spaceEquipmentTotal
For the years ended September 30,
Remainder of 2020$63,960  $6,336  $70,296  
202158,107  6,812  64,919  
202238,047  2,904  40,951  
202325,691  124  25,815  
202411,181  77  11,258  
Thereafter7,067    7,067  
Total minimum lease payments$204,053  $16,253  $220,306  
Less imputed interest(11,269) (1,792) (13,061) 
Total lease liabilities$192,784  $14,461  $207,245  

Our weighted average remaining lease term at December 31, 2019 is 3.1 years.
For the three months ended December 31, 2019, we made cash payments of $28.1 million for amounts included in our lease liabilities. New or amended leases resulted in additional right-of-use assets of $17.3 million.

4. Revenue recognition

We recognize revenue as, or when, we satisfy performance obligations under a contract. The majority of our contracts have performance obligations which are satisfied over time. In most cases, we view our performance obligations as promises to transfer a series of distinct services to our customer that are substantially the same and which have the same pattern of service. We recognize revenue over the performance period as a customer receives the benefits of our services.
Disaggregation of revenue
In addition to our segment reporting, we disaggregate our revenues by service, contract type, customer type and geography. Our operating segments represent the manner in which our Chief Executive Officer reviews our financial results which is further discussed in "Note 2. Segment information."

By operating segment and service
(dollars in thousands)Three Months Ended December 31, 2019Three Months Ended December 31, 2018
Program administration$236,907  $218,973  
Assessments and appeals33,831  37,221  
Workforce and children services29,386  23,903  
Other12,157  14,116  
Total U.S. Health and Human Services312,281  294,213  
Program administration281,688  140,121  
Technology solutions43,606  38,883  
Assessments and appeals41,277  37,983  
Total U.S. Federal Services366,571  216,987  
Workforce and children services57,239  73,278  
Assessments and appeals62,643  62,310  
Program administration17,094  15,320  
Other2,401  2,511  
Total Outside the U.S.139,377  153,419  
Total revenue$818,229  $664,619  

By contract type
(dollars in thousands)Three Months Ended December 31, 2019Three Months Ended December 31, 2018
Performance-based$292,758  $312,887  
Cost-plus362,811  175,298  
Fixed price119,216  147,151  
Time and materials43,444  29,283  
Total revenue$818,229  $664,619  


By customer type
(dollars in thousands)Three Months Ended December 31, 2019Three Months Ended December 31, 2018
New York State government agencies$97,223  $91,712  
Other U.S. state government agencies209,886  198,902  
Total U.S. state government agencies307,109  290,614  
United States Federal Government agencies351,833  198,278  
International government agencies130,816  142,781  
Other, including local municipalities and commercial customers28,471  32,946  
Total revenue$818,229  $664,619  

By geography
(dollars in thousands)Three Months Ended December 31, 2019Three Months Ended December 31, 2018
United States of America$678,852  $511,200  
United Kingdom73,002  73,418  
Australia37,435  53,373  
Rest of world28,940  26,628  
Total revenue$818,229  $664,619  

Contract balances
Differences in timing between revenue recognition and cash collection result in contract assets and contract liabilities. We classify these assets as accounts receivable — billed and billable and unbilled receivables; the liabilities are classified as deferred revenue.
In many contracts, we bill our customers on a monthly basis shortly after the month end for work performed in that month. Funds are considered collectible and are included within accounts receivable — billed and billable.
Exceptions to this pattern will arise for various reasons, including those listed below.
Under cost-plus contracts, we are typically required to estimate a contract’s share of our general and administrative expenses. This share is based upon estimates of total costs which may vary over time. We typically invoice our customers at an agreed provisional billing rate which will differ from actual rates incurred. If our actual rates are higher than the provisional billing rates, an asset is recorded for this variance; if the provisional billing rate is higher than our actual rate, we record a liability.
Certain contracts include retainage balances, whereby revenue is earned but cash payments are held back by the customer for a period of time, typically to allow the customer to evaluate the quality of our performance. This balance is classified as accounts receivable - unbilled until restrictions on billing have been lifted.
In certain contracts, we may receive funds from our customers prior to performing operations. These funds are typically referred to as “set-up costs” and reflect the need for us to make investments in infrastructure prior to providing a service. This investment in infrastructure is not a performance obligation which is distinct from the service that is subsequently provided and, as a result, revenue is not recognized based upon the establishment of this infrastructure, but rather over the course of the contractual relationship. The funds are initially recorded as deferred revenue and recognized over the term of the contract. Other contracts may not include set-up fees but will provide higher fees in earlier periods of the contract. The premium on these fees is deferred.
Some of our contracts, notably our welfare-to-work contracts in the Outside the U.S. Segment, include payments for outcomes, such as job retention, which occur over several months. We are required to

estimate these outcome fees ahead of their realization and recognize this estimated fee over the period of delivery.
During the three months ended December 31, 2019 and 2018, we recognized revenue of $18.0 million and $21.8 million included in our deferred revenue balances at September 30, 2019 and 2018, respectively.
Contract estimates
We are required to use estimates in recognizing certain revenue.
Some of our performance-based contract revenue is recognized based upon future outcomes defined in each contract. This is the case in many of our welfare-to-work contracts in the Outside the U.S. Segment, where we are paid as individuals attain employment goals, which may take many months to achieve. We recognize revenue on these contracts over the period of performance. Our estimates vary from contract to contract but may include estimates of the number of participants, the length of the contract and the participants reaching employment milestones. We are required to estimate these outcome fees ahead of their realization and recognize this estimated fee over the period of delivery.
Other performance-based contracts with future outcomes include those where we recognize an average effective rate per participant based upon the total volume of expected participants. In this instance, we are required to estimate the amount of discount applied to determine the average rate of revenue per participant.
Where we have changes to our estimates, these are recognized on a cumulative catch-up basis. In the three months ended December 31, 2019 and 2018, we reported reductions in revenue of $1.4 million and $1.5 million from changes in estimates, respectively.
Deferred contract costs
For many contracts, we incur significant incremental costs at the beginning of an arrangement. Typically, these costs relate to the establishment of infrastructure which we utilize to satisfy our performance obligations with the contract. We report these costs as deferred contract costs and amortize them on a straight-line basis over the shorter of the useful economic life of the asset or the anticipated term of the contract.
In the three months ended December 31, 2019 and 2018, we deferred $1.3 million and $3.1 million of costs, respectively, and recorded amortization expense of $2.2 million and $1.3 million, respectively. This amortization was recorded within our "cost of revenue" on our consolidated statements of operations.
Remaining performance obligations
At December 31, 2019, we had approximately $300 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately 60% of this balance within the next twelve months. This balance excludes contracts with an original duration of twelve months or less, including contracts with a penalty-free termination for convenience clause, and any variable consideration which is allocated entirely to future performance obligations including variable transaction fees or fees tied directly to costs incurred.


5. Earnings Per Share
The weighted average number of shares outstanding used to compute earnings per share was as follows:
 Three Months Ended December 31,
(shares in thousands)20192018
Basic weighted average shares outstanding64,597  64,827  
Dilutive effect of unvested RSUs161  150  
Denominator for diluted earnings per share64,758  64,977  

Our dilutive earnings per share for the three months ended December 31, 2019 and 2018, excludes any effect from approximately 274,000 and 282,000 unvested restricted stock units, respectively, as adding them to our calculation would have been antidilutive.

6. Acquisitions
On November 16, 2018, we acquired General Dynamics Information Technology's citizen engagement centers business for $430.7 million. This acquisition strengthens our position in the administration of federal government programs and the business was integrated into our U.S. Federal Services Segment. We completed our allocation of the purchase price to the assets acquired and liabilities assumed in September 2019, including goodwill of $184.6 million and intangible assets of $122.3 million.
On August 16, 2019, we acquired 100% of the share capital of GT Hiring Solutions (2005) Inc. ("GT Hiring") for a purchase price estimated to be $6.1 million (8.1 million Canadian Dollars). The purchase price is subject to a net working capital true-up. GT Hiring provides employment services in British Columbia. We acquired GT Hiring to enhance the reach and capabilities of our Canadian employment services and, accordingly, the business has been integrated into our Outside the U.S. Segment. We are still in the process of finalizing the purchase price and the allocation of assets acquired and liabilities assumed. We recorded estimated goodwill and intangible assets balances of $1.7 million and $2.7 million, respectively, related to this acquisition. The goodwill represents the assembled workforce and enhanced knowledge, experience and reputation we have obtained from the acquisition and will be deductible for tax purposes. The intangible assets represent customer relationships, which will be amortized over seven years.

7. Supplemental Disclosures
Under a resolution adopted in June 2018, the Board of Directors authorized the purchase, at management's discretion, of up to $200 million of our common stock. During the three months ended December 31, 2019, we purchased 26,000 of our common shares at a cost of $1.9 million. During the three months ended December 31, 2018, we acquired approximately 654,000 common shares at a cost of $41.3 million. At December 31, 2019, $144.1 million remained available for future stock purchases. Subsequent to December 31, 2019, we have purchased a further 30,000 shares at a cost of $2.2 million.
During the three months ended December 31, 2019, we granted 287,000 restricted stock units to our board of directors and employees. These awards will vest ratably over one and five years, respectively.
Our deferred compensation plan uses both mutual fund and life insurance investments to fund its obligations. The mutual funds are recorded at fair value, based upon quoted prices in active markets, and the life insurance investments at cash surrender value; changes in value are reported in our consolidated statements of operations. At December 31, 2019, the deferred compensation plan held $22.1 million of the mutual fund investments.
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other amounts included within current assets and liabilities that meet the definition of a financial instrument are shown at values equivalent to fair value due to the short-term nature of these items. Our accounts receivable billed and billable balance includes both amounts invoiced and amounts that are ready to be invoiced where the funds are collectible within standard invoice terms. Our accounts receivable unbilled balance includes balances where revenue has been

earned but no invoice was issued on or before December 31, 2019. Restricted cash represents funds which are held in our bank accounts but which we are precluded from using for general business needs through contractual requirements; these requirements include serving as collateral for lease, credit card or letter of credit arrangements or where we hold funds on behalf of clients. Restricted cash is included within "prepaid expenses and other assets" on our balance sheet and is included within "cash, cash equivalents and restricted cash" in our consolidated statements of cash flows.