Annual report pursuant to Section 13 and 15(d)

Business Segments

v3.21.2
Business Segments
 12 Months Ended
Sep. 30, 2021
Segment Reporting [Abstract]  
Business Segments BUSINESS SEGMENTS
We conduct our operations through three business segments: U.S. Services, U.S. Federal Services, and Outside the U.S.
U.S. Services
Our U.S. Services Segment provides a variety of business process services ("BPS") such as program administration, appeals and assessments, 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, the Children's Health Insurance Program ("CHIP"), Temporary Assistance to Needy Families ("TANF"), and child support programs. Addressing societal macro trends such as aging populations and rising costs, the segment continues to execute on its clinical evolution strategy by expanding its clinical offerings in public health with new work in contact tracing, disease investigation, and vaccine distribution support services as part of the governments' COVID-19 response efforts. The segment also successfully expanded into the unemployment insurance market, supporting more than 15 states in their unemployment insurance programs.
U.S. Federal Services
From technology solutions to program administration and operations, our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. Federal Government Agencies better deliver on their mission. This also includes appeals and assessments services, system and application development, IT modernization, and maintenance services. The segment also contains certain state-based assessments and appeals work that is part of the segment's heritage within the Medicare Appeals portfolio which continues to be managed within this segment. Benefiting from the Attain platform, the segment executes on its digital strategy to deliver technology solutions that advance agency missions, including the challenge to modernize, provide better customer experience, and drive process efficiencies. The segment continues to expand its clinical solutions with the acquisition of VES which manages the clinical evaluation process for U.S. veterans and service members on behalf of the U.S. Department of Veterans Affairs. The segment further supports clinical offerings in public health with new work supporting the U.S. Federal Government's COVID-19 response efforts. This included expanded work with the Centers for Disease Control and Prevention ("CDC") for their helpline and increased support for the IRS Wage and Investment Division's response efforts to general inquiries regarding the Coronavirus Aid Relief & Economic Security ("CARES") Act and Economic Impact Payment Service Plan.
Outside the U.S.
Our Outside the U.S. Segment provides BPS for international governments and commercial clients, transforming the lives of people around the world. Helping people find employment, access vital support, and remain healthy, these services include health and disability assessments, program administration for employment services, wellbeing solutions, and other job seeker related services. We support programs and deliver services in the U.K., including the Health Assessment Advisory Service ("HAAS"), the Work & Health Programme, Fair Start, and Restart; Australia, including jobactive and the Disability Employment Service; Canada, including Health Insurance British Columbia and the Employment Program of British Columbia; in addition to Italy, Saudi Arabia, Singapore, South Korea, and Sweden, where we predominantly provide employment support and job seeker services.
Table 3.1: Results of Operation by Business Segment (1)
For the Year Ended September 30,
2021 2020 2019
Amount % (2) Amount % (2) Amount % (2)
(dollars in thousands)
Revenue:
U.S. Services $ 1,662,110  $ 1,329,274  $ 1,176,488 
U.S. Federal Services 1,893,284  1,633,337  1,111,197 
Outside the U.S. 699,091  498,926  599,130 
Revenue $ 4,254,485  $ 3,461,537  $ 2,886,815 
Gross profit:
U.S. Services $ 408,050  24.6 % $ 360,272  27.1 % $ 344,109  29.2 %
U.S. Federal Services 432,551  22.8 % 318,925  19.5 % 242,070  21.8 %
Outside the U.S. 106,374  15.2 % 31,805  6.4 % 85,005  14.2 %
Gross profit $ 946,975  22.3 % $ 711,002  20.5 % $ 671,184  23.2 %
Selling, general, and administrative expenses:
U.S. Services $ 153,609  9.2 % $ 132,489  10.0 % $ 123,275  10.5 %
U.S. Federal Services 243,485  12.9 % 186,023  11.4 % 126,128  11.4 %
Outside the U.S. 86,248  12.3 % 65,938  13.2 % 68,944  11.5 %
Gain on sale of business (4) —  NM (1,718) NM —  NM
Other (3) 10,746  NM 4,358  NM 2,676  NM
Selling, general, and administrative expenses $ 494,088  11.6 % $ 387,090  11.2 % $ 321,023  11.1 %
Operating income:
U.S. Services $ 254,441  15.3 % $ 227,783  17.1 % $ 220,834  18.8 %
U.S. Federal Services 189,066  10.0 % 132,902  8.1 % 115,942  10.4 %
Outside the U.S. 20,126  2.9 % (34,133) (6.8) % 16,061  2.7 %
Amortization of intangible assets (44,357) NM (35,634) NM (33,054) NM
Gain on sale of business (4) —  NM 1,718  NM —  NM
Other (3) (10,746) NM (4,358) NM (2,676) NM
Operating income $ 408,530  9.6 % $ 288,278  8.3 % $ 317,107  11.0 %
Depreciation and amortization:
U.S. Services $ 20,350  1.2 % $ 20,951  1.6 % $ 18,466  1.6 %
U.S. Federal Services 12,986  0.7 % 25,153  1.5 % 16,802  1.5 %
Outside the U.S. 13,025  1.9 % 18,423  3.7 % 17,136  2.9 %
Depreciation and amortization $ 46,361  1.1 % $ 64,527  1.9 % $ 52,404  1.8 %
(1)Expenses that are not specifically included in the segments are included in other categories, including amortization of intangible assets and the direct costs of acquisitions. These costs are excluded from measuring each segment's operating performance.
(2)Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM."
(3)Other selling, general, and administrative expenses includes credits and costs that are not allocated to a particular segment. This includes expenses incurred as part of our acquisitions, as well as potential acquisitions which have not been or may not be completed. Our results for the year ended September 30, 2021, included $9.5 million of expenses relating to the acquisitions of Attain, LLC, and VES Group, Inc. For more information, see "Note 6. Business Combinations."
(4)During fiscal year 2020, we sold Q2 Administrators LLC, a subsidiary within our U.S. Federal Services Segment, resulting in a gain.
Table 3.2: Assets by Segment
As of September 30,
2021 2020
(in thousands)
U.S. Services $ 701,565  $ 702,728 
U.S. Federal Services 2,863,581  937,477 
Outside the U.S. 324,899  224,532 
Corporate 228,920  159,965 
Assets $ 4,118,965  $ 2,024,702 
Identifiable assets for U.S. Federal Services increased due to the acquisitions of Attain, LLC and VES Group, Inc. Refer to "Note 6. Business Combinations" for details.
Our long-lived assets consist of property and equipment, capitalized software costs, operating lease right-of-use assets, and deferred compensation plan assets.
Table 3.3: Long-Lived Assets by Geography
As of September 30,
2021 2020
(in thousands)
United States $ 276,754  $ 255,346 
Australia 17,105  30,183 
Canada 20,637  24,522 
United Kingdom 11,914  7,610 
Rest of World 5,172  1,071 
Total $ 331,582  $ 318,732