Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.21.2
Revenue Recognition
 9 Months Ended
Jun. 30, 2021
Revenue from Contract with Customer [Abstract]  
Revenue Recognition 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 customers 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
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Program administration $ 325,755  $ 251,616  $ 964,981  $ 724,960 
Assessments and appeals 33,529  40,875  101,561  104,621 
Workforce and children services 64,240  32,531  167,106  90,651 
Other 12,814  11,928  35,839  37,697 
Total U.S. Services $ 436,338  $ 336,950  $ 1,269,487  $ 957,929 
Program administration $ 451,594  $ 362,973  $ 1,005,706  $ 949,071 
Technology solutions 89,559  42,101  187,006  130,172 
Assessments and appeals 76,448  45,069  160,270  130,862 
Total U.S. Federal Services $ 617,601  $ 450,143  $ 1,352,982  $ 1,210,105 
Workforce and children services $ 94,310  $ 55,046  $ 269,743  $ 146,968 
Assessments and appeals 58,664  42,468  169,753  167,397 
Program administration 34,296  15,544  80,284  49,583 
Other 2,311  1,186  6,105  5,719 
Total Outside the U.S. $ 189,581  $ 114,244  $ 525,885  $ 369,667 
Total revenue $ 1,243,520  $ 901,337  $ 3,148,354  $ 2,537,701 
By contract type
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Performance-based $ 389,800  $ 295,650  $ 1,033,509  $ 864,077 
Cost-plus 282,808  422,641  953,373  1,184,425 
Fixed price 146,175  132,535  413,296  352,255 
Time and materials 424,737  50,511  748,176  136,944 
Total revenue $ 1,243,520  $ 901,337  $ 3,148,354  $ 2,537,701 

By customer type
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 2020 2021 2020
New York State government agencies $ 102,195  $ 79,140  $ 289,462  $ 276,585 
Other U.S. state government agencies 329,792  265,608  976,336  692,689 
Total U.S. state government agencies 431,987  344,748  1,265,798  969,274 
U.S. Federal Government agencies 594,771  429,031  1,288,213  1,155,773 
International government agencies 180,049  107,353  499,091  345,629 
Other, including local municipalities and commercial customers 36,713  20,205  95,252  67,025 
Total revenue $ 1,243,520  $ 901,337  $ 3,148,354  $ 2,537,701 

By geography
Three Months Ended June 30, Nine Months Ended June 30,
(in thousands) 2021 2020 2021 2020
United States $ 1,053,940  $ 787,092  $ 2,622,469  $ 2,168,033 
United Kingdom 74,109  53,364  211,777  190,088 
Australia 65,283  38,415  192,161  100,390 
Rest of world 50,188  22,466  121,947  79,190 
Total revenue $ 1,243,520  $ 901,337  $ 3,148,354  $ 2,537,701 

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 and such balances 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 may 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 rates are higher than our actual rates, we record a liability.
•Certain contracts include retainage balances, whereby revenue is earned but some portion of cash payments are held back by the customer for a period of time, typically to allow the customer to confirm the objective criteria laid out by the contract have been met. This balance is classified as accounts receivable - unbilled until restrictions on billing are 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 employment services contracts in the Outside the U.S. Segment, include payments for desired outcomes, such as job placement and job retention and these outcome payments 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.
Of our revenue for the three and nine months ended June 30, 2021, approximately $7.5 million and $36.7 million, respectively, were from cash payments made to us prior to October 1, 2020. For the three and nine months ended June 30, 2020, we recognized revenue of $9.1 million and $49.2 million, respectively, from payments made prior to October 1, 2019.
Contract estimates
We are required to use estimates in recognizing revenue from some of our contracts. As discussed in "Note 1. Organization and Basis of Presentation," the calculation of these estimates has been complicated by the COVID-19 pandemic, which has reduced our ability to use past results to estimate future performance.
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 employment services 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. In almost all of the jurisdictions in which we operate, the employment markets have experienced significant changes due to the COVID-19 pandemic. As the pandemic commenced, many employment opportunities were terminated. Our volume of new program participants is beginning to increase as governments shift their focus to addressing the residual impacts of the pandemic, such as the economy and unemployment, particularly in those countries where the pandemic has stabilized, and economies are beginning to reopen.
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. Our revised estimates of participant numbers are based upon our updated evaluation of probable future volumes.
Where we make changes to our estimates, these are recognized on a cumulative catch-up basis. In the three and nine months ended June 30, 2021, we reported a benefit to revenue of $1.8 million and $17.8 million, respectively, and a benefit to diluted earnings per share of $0.03 and $0.20, respectively, from changes in estimates. The corresponding change in fiscal year 2020 was a decline of $1.4 million and $9.1 million for the three and nine months ended June 30, 2020, respectively.
Remaining performance obligations
At June 30, 2021, we had approximately $635 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately 42% of this balance within the next 12 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.