Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.22.2
Revenue Recognition
 9 Months Ended
Jun. 30, 2022
Revenue from Contract with Customer [Abstract]  
Revenue Recognition REVENUE RECOGNITION
The Company recognizes 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.
Disaggregation of Revenue
In addition to our segment reporting, we disaggregate our revenues by 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 3. Business Segments."
Table 4.1: Revenue by Contract Type
For the Three Months Ended For the Nine Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Amount % Amount % Amount % Amount %
(dollars in thousands)
Performance-based $ 520,202  46.2 % $ 389,800  31.3 % $ 1,527,368  44.2 % $ 1,033,509  32.8 %
Cost-plus 282,578  25.1 % 282,808  22.7 % 945,482  27.4 % 953,373  30.3 %
Fixed price 160,219  14.2 % 146,175  11.8 % 470,591  13.6 % 413,296  13.1 %
Time and materials 162,786  14.5 % 424,737  34.2 % 510,546  14.8 % 748,176  23.8 %
Total revenue $ 1,125,785  $ 1,243,520  $ 3,453,987  $ 3,148,354 
Table 4.2: Revenue by Customer Type
For the Three Months Ended For the Nine Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Amount % Amount % Amount % Amount %
(dollars in thousands)
U.S. state government agencies $ 401,042  35.7 % $ 431,987  34.7 % $ 1,183,876  34.3 % $ 1,265,798  40.2 %
U.S. federal government agencies 507,047  45.0 % 594,771  47.8 % 1,624,848  47.0 % 1,288,213  40.9 %
International government agencies 191,753  17.0 % 180,049  14.5 % 557,928  16.2 % 499,091  15.9 %
Other, including local municipalities and commercial customers 25,943  2.3 % 36,713  3.0 % 87,335  2.5 % 95,252  3.0 %
Total revenue $ 1,125,785  $ 1,243,520  $ 3,453,987  $ 3,148,354 
Table 4.3: Revenue by Geography
For the Three Months Ended For the Nine Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Amount % Amount % Amount % Amount %
(dollars in thousands)
United States $ 924,839  82.2 % $ 1,053,940  84.8 % $ 2,864,492  83.0 % $ 2,622,469  83.3 %
United Kingdom 109,776  9.7 % 74,109  6.0 % 303,481  8.8 % 211,777  6.7 %
Australia 43,594  3.9 % 65,283  5.2 % 143,078  4.1 % 192,161  6.1 %
Rest of world 47,576  4.2 % 50,188  4.0 % 142,936  4.1 % 121,947  3.9 %
Total revenue $ 1,125,785  $ 1,243,520  $ 3,453,987  $ 3,148,354 
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. These 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. As of June 30, 2022, and September 30, 2021, $12.2 million and $10.4 million, respectively, of our unbilled receivables related to amounts pursuant to contractual retainage provisions.
•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.
During the three and nine months ended June 30, 2022, we recognized revenue of $23.7 million and $85.5 million, respectively, that was included in our deferred revenue balances as of September 30, 2021. During the three and nine months ended June 30, 2021, we recognized revenue of $7.5 million and $36.7 million, respectively, that was included in our deferred revenue balances at September 30, 2020.
Contract estimates
We are required to use estimates in recognizing revenue from some of our contracts. As discussed in "Note 2. Significant Accounting Policies," 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 collection and recognize this estimated fee over the period of delivery. Changes to our estimates are recognized on a cumulative catch-up basis.
Table 4.4: Effect of Changes in Contract Estimates
For the Three Months Ended For the Nine Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
(in thousands, except per share data)
Benefit to/(reduction of) revenue recognized due to changes in contract estimates $ (959) $ 1,800  $ (5,174) $ 17,800 
Benefit to/(reduction of) diluted earnings per share recognized due to changes in contract estimates $ (0.01) $ 0.03  $ (0.06) $ 0.20 
Remaining performance obligations
As of June 30, 2022, we had approximately $550 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately 45% of this balance within the next 12 months. This balance excludes contracts with an original duration of 12 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.