Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.25.0.1
Revenue Recognition
 3 Months Ended
Dec. 31, 2024
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 that 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.
Table 4.1: Revenue by Service Type
For the Three Months Ended
December 31, 2024 December 31, 2023
(dollars in thousands)
Program Operations $ 727,967  51.9  % $ 687,370  51.8  %
Clinical Services 471,526  33.6  % 428,369  32.3  %
Employment & Other 113,618  8.1  % 118,288  8.9  %
Technology Solutions 89,564  6.4  % 93,014  7.0  %
Total revenue $ 1,402,675  $ 1,327,041 
Table 4.2: Revenue by Contract Type
For the Three Months Ended
December 31, 2024 December 31, 2023
(dollars in thousands)
Performance-based $ 717,771  51.2  % $ 704,711  53.1  %
Cost-plus 384,427  27.4  % 342,015  25.8  %
Fixed price 174,679  12.5  % 176,677  13.3  %
Time and materials 125,798  9.0  % 103,638  7.8  %
Total revenue $ 1,402,675  $ 1,327,041 
Table 4.3: Revenue by Customer Type
For the Three Months Ended
December 31, 2024 December 31, 2023
(dollars in thousands)
New York state government agencies $ 161,695  11.5  % $ 160,534  12.1  %
Other U.S. state government agencies 291,067  20.8  % 326,409  24.6  %
Total U.S. state government agencies 452,762  486,943 
U.S. federal government agencies 764,437  54.5  % 662,946  50.0  %
International government agencies 166,866  11.9  % 155,612  11.7  %
Other, including local municipalities and commercial customers 18,610  1.3  % 21,540  1.6  %
Total revenue $ 1,402,675  $ 1,327,041 
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, net.
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 December 31, 2024, and September 30, 2024, $23.4 million and $31.9 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 that 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 months ended December 31, 2024, we recognized revenue of $47.6 million included in our deferred revenue balances at September 30, 2024. During the three months ended December 31, 2023, we recognized revenue of $37.7 million included in our deferred revenue balances at September 30, 2023.
Contract estimates
We are required to use estimates in recognizing revenue from some of our contracts.
Certain performance-based contracts include variable consideration in the form of penalties and incentives, based upon our performance under the terms of the contract. The calculation of these penalties and incentives requires the evaluation of both objective and subjective criteria, which may require the use of estimates.
Within our employment services business in our Outside the U.S. segment, some of our performance-based contract revenue is recognized based upon future milestones defined in each contract, which requires us to make estimates about the attainment of the milestones.
We estimate the total variable consideration we will receive using the expected value method. We recognize the revenue over the expected period of performance. At each reporting period, we update our estimates of the variable fees to represent the circumstances present at the end of the reporting period. We are required to constrain our estimates to the extent that it is probable that there will not be a significant reversal of cumulative revenue when the uncertainty is resolved. We do not have a history of significant constraints on these contracts.
Changes to our estimates are recognized on a cumulative catch-up basis. For the three months ended December 31, 2024, there was an increase in revenue and diluted earnings per share of $6.8 million and $0.08, respectively, from changes in estimates. For the three months ended December 31, 2023, there was a decrease in revenue and diluted earnings per share of $4.6 million and $0.07, respectively, from changes in estimates.
Remaining performance obligations
As of December 31, 2024, we had approximately $297 million of remaining performance obligations, with obligations running through March 2032. We anticipate that most of the obligations will be settled within a shorter period of time, with 61% of this balance being utilized 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 that is allocated entirely to future performance obligations, including variable transaction fees or fees tied directly to costs incurred.