Annual report pursuant to Section 13 and 15(d)

Business Segments

v3.23.3
Business Segments
 12 Months Ended
Sep. 30, 2023
Segment Reporting [Abstract]  
Business Segments BUSINESS SEGMENTS
We conduct our operations through three business segments: U.S. Federal Services, U.S. Services, and Outside the U.S.
U.S. Federal Services
Our U.S. Federal Services Segment delivers end-to-end solutions that help various U.S. federal government agencies better deliver on their mission, including program operations and management, clinical services, and technology solutions. This segment also includes appeals and assessments services, system and application development, Information Technology ("IT") modernization, and maintenance services. Certain state-based assessments and appeals work that is part of the segment's heritage continues to be managed within this segment. Under Technology Consulting Services ("TCS"), 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 through VES, which manages the clinical evaluation process for U.S. veterans and service members on behalf of the VA.
U.S. Services
Our U.S. Services Segment provides a variety of BPS, such as program administration, assessments, and related consulting work for U.S. state and local government programs. These services support a variety of programs, including the ACA, Medicaid, the Children's Health Insurance Program ("CHIP"), Temporary Assistance to Needy Families ("TANF"), and child support programs. Over the last three years, many programs in this segment have been operating with depressed margins resulting from the pause in Medicaid redeterminations. The depressed margins have resulted from reduced operating leverage in the segment as costs cannot scale down at the same rate to meet lower demand due to requirements to fulfill other obligations on these contracts. With the resumption of redeterminations, we expect a full period of volumes in 2024 coming back into these programs, enabling our operating leverage to recover.
Outside the U.S.
Our Outside the U.S. Segment provides BPS for international governments, 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 United Kingdom, including the Health Assessment Advisory Service ("HAAS") and the recently awarded replacement contract to start in 2024, Functional Assessment Services (“FAS”), and Restart; Australia, including Workforce Australia and employment support and job seeker services worldwide.
Table 3.1: Results of Operation by Business Segment
For the Year Ended September 30,
2023 2022 2021
Amount % (1) Amount % (1) Amount % (1)
(dollars in thousands)
Revenue:
U.S. Federal Services $ 2,403,606  $ 2,259,744  $ 1,893,284 
U.S. Services 1,812,069  1,607,612  1,662,110 
Outside the U.S. 689,053  763,662  699,091 
Revenue $ 4,904,728  $ 4,631,018  $ 4,254,485 
Gross profit:
U.S. Federal Services $ 557,886  23.2  % $ 519,440  23.0  % $ 432,551  22.8  %
U.S. Services 377,541  20.8  % 343,004  21.3  % 408,050  24.6  %
Outside the U.S. 93,181  13.5  % 77,366  10.1  % 106,374  15.2  %
Gross profit $ 1,028,608  21.0  % $ 939,810  20.3  % $ 946,975  22.3  %
Selling, general, and administrative expenses:
U.S. Federal Services $ 308,197  12.8  % $ 284,509  12.6  % $ 243,485  12.9  %
U.S. Services 194,991  10.8  % 160,902  10.0  % 153,609  9.2  %
Outside the U.S. 102,311  14.8  % 92,536  12.1  % 86,248  12.3  %
Divestiture related charges (2) 3,751  NM —  NM —  NM
Other (4) 29,973  NM (3,454) NM 10,746  NM
Selling, general, and administrative expenses $ 639,223  13.0  % $ 534,493  11.5  % $ 494,088  11.6  %
Operating income/(loss):
U.S. Federal Services $ 249,689  10.4  % $ 234,931  10.4  % $ 189,066  10.0  %
U.S. Services 182,550  10.1  % 182,102  11.3  % 254,441  15.3  %
Outside the U.S. (9,130) (1.3) % (15,170) (2.0) % 20,126  2.9  %
Amortization of intangible assets (94,591) NM (90,465) NM (44,357) NM
Divestiture related charges (2) (3,751) NM —  NM —  NM
Gain on sale of land and building (3) —  NM 11,046  NM —  NM
Other (4) (29,973) NM 3,454  NM (10,746) NM
Operating income $ 294,794  6.0  % $ 325,898  7.0  % $ 408,530  9.6  %
Depreciation and amortization:
U.S. Federal Services $ 18,336  0.8  % $ 12,332  0.5  % $ 12,986  0.7  %
U.S. Services 22,674  1.3  % 16,528  1.0  % 20,350  1.2  %
Outside the U.S. 13,715  2.0  % 13,470  1.8  % 13,025  1.9  %
Depreciation and amortization $ 54,725  1.1  % $ 42,330  0.9  % $ 46,361  1.1  %
(1)Percentage of respective segment revenue. Percentages not considered meaningful are marked "NM."
(2)During fiscal year 2023, we sold a small commercial practice in the United Kingdom and our employment operations business in Sweden, both subsidiaries within our Outside the U.S. Segment, resulting in a loss of $0.9 million. In addition, we recorded impairment losses of $2.9 million on businesses sold subsequent to fiscal year end. Refer to "Note 6. Business Combinations and Divestitures" and "Note 17. Subsequent Events" for more details.
(3)During fiscal year 2022, we sold the land and building that held our corporate headquarters, resulting in a gain on sale of $11.0 million.
(4)Other includes credits and costs that are not allocated to a particular segment. For the fiscal year 2023, these charges include $29.3 million related to the costs of a previously disclosed cybersecurity incident. Other charges include direct costs of acquisitions. These costs are excluded from measuring each segment's operating performance.
Table 3.2: Assets by Segment
As of September 30,
2023 2022
(in thousands)
U.S. Federal Services $ 2,716,367  $ 2,858,662 
U.S. Services 780,737  736,970 
Outside the U.S. 278,289  277,016 
Corporate 210,404  120,066 
Assets $ 3,985,797  $ 3,992,714 
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,
2023 2022
(in thousands)
United States $ 313,830  $ 238,523 
Outside the US 39,660  42,410 
Total $ 353,490  $ 280,933