Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

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Revenue Recognition
 3 Months Ended
Dec. 31, 2019
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 customer 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
(dollars in thousands) Three Months Ended December 31, 2019 Three Months Ended December 31, 2018
Program administration $ 236,907    $ 218,973   
Assessments and appeals 33,831    37,221   
Workforce and children services 29,386    23,903   
Other 12,157    14,116   
Total U.S. Health and Human Services 312,281    294,213   
Program administration 281,688    140,121   
Technology solutions 43,606    38,883   
Assessments and appeals 41,277    37,983   
Total U.S. Federal Services 366,571    216,987   
Workforce and children services 57,239    73,278   
Assessments and appeals 62,643    62,310   
Program administration 17,094    15,320   
Other 2,401    2,511   
Total Outside the U.S. 139,377    153,419   
Total revenue $ 818,229    $ 664,619   

By contract type
(dollars in thousands) Three Months Ended December 31, 2019 Three Months Ended December 31, 2018
Performance-based $ 292,758    $ 312,887   
Cost-plus 362,811    175,298   
Fixed price 119,216    147,151   
Time and materials 43,444    29,283   
Total revenue $ 818,229    $ 664,619   
By customer type
(dollars in thousands) Three Months Ended December 31, 2019 Three Months Ended December 31, 2018
New York State government agencies $ 97,223    $ 91,712   
Other U.S. state government agencies 209,886    198,902   
Total U.S. state government agencies 307,109    290,614   
United States Federal Government agencies 351,833    198,278   
International government agencies 130,816    142,781   
Other, including local municipalities and commercial customers 28,471    32,946   
Total revenue $ 818,229    $ 664,619   

By geography
(dollars in thousands) Three Months Ended December 31, 2019 Three Months Ended December 31, 2018
United States of America $ 678,852    $ 511,200   
United Kingdom 73,002    73,418   
Australia 37,435    53,373   
Rest of world 28,940    26,628   
Total revenue $ 818,229    $ 664,619   

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. Funds 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 will 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 rate is higher than our actual rate, we record a liability.
•Certain contracts include retainage balances, whereby revenue is earned but cash payments are held back by the customer for a period of time, typically to allow the customer to evaluate the quality of our performance. This balance is classified as accounts receivable - unbilled until restrictions on billing have been 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 welfare-to-work contracts in the Outside the U.S. Segment, include payments for outcomes, such as job retention, which 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, 2019 and 2018, we recognized revenue of $18.0 million and $21.8 million included in our deferred revenue balances at September 30, 2019 and 2018, respectively.
Contract estimates
We are required to use estimates in recognizing certain revenue.
•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 welfare-to-work 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.
•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.
Where we have changes to our estimates, these are recognized on a cumulative catch-up basis. In the three months ended December 31, 2019 and 2018, we reported reductions in revenue of $1.4 million and $1.5 million from changes in estimates, respectively.
Deferred contract costs
For many contracts, we incur significant incremental costs at the beginning of an arrangement. Typically, these costs relate to the establishment of infrastructure which we utilize to satisfy our performance obligations with the contract. We report these costs as deferred contract costs and amortize them on a straight-line basis over the shorter of the useful economic life of the asset or the anticipated term of the contract.
In the three months ended December 31, 2019 and 2018, we deferred $1.3 million and $3.1 million of costs, respectively, and recorded amortization expense of $2.2 million and $1.3 million, respectively. This amortization was recorded within our "cost of revenue" on our consolidated statements of operations.
Remaining performance obligations
At December 31, 2019, we had approximately $300 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately 60% of this balance within the next twelve 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.