| 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 Three Months Ended March 31, Six Months Ended March 31, (in thousands) 2021 2020 2021 2020 Program administration $ 345,383 $ 236,436 $ 639,227 $ 473,343 Assessments and appeals 35,416 29,916 68,031 63,747 Workforce and children services 55,045 28,734 102,866 58,120 Other 12,371 13,612 23,025 25,769 Total U.S. Services $ 448,215 $ 308,698 $ 833,149 $ 620,979 Program administration $ 226,322 $ 304,367 $ 554,112 $ 586,055 Technology solutions 62,784 44,508 97,448 88,114 Assessments and appeals 41,030 44,516 83,821 85,793 Total U.S. Federal Services $ 330,136 $ 393,391 $ 735,381 $ 759,962 Workforce and children services $ 97,971 $ 34,683 $ 175,433 $ 91,922 Assessments and appeals 57,966 62,286 111,089 124,929 Program administration 22,932 16,945 45,988 34,039 Other 2,060 2,132 3,794 4,533 Total Outside the U.S. $ 180,929 $ 116,046 $ 336,304 $ 255,423 Total revenue $ 959,280 $ 818,135 $ 1,904,834 $ 1,636,364 By contract type Three Months Ended March 31, Six Months Ended March 31, (in thousands) 2021 2020 2021 2020 Performance-based $ 349,749 $ 275,669 $ 643,709 $ 568,427 Cost-plus 286,082 398,973 670,565 761,784 Fixed price 146,344 100,504 267,121 219,720 Time and materials 177,105 42,989 323,439 86,433 Total revenue $ 959,280 $ 818,135 $ 1,904,834 $ 1,636,364 By customer type Three Months Ended March 31, Six Months Ended March 31, (in thousands) 2021 2020 2021 2020 New York State government agencies $ 111,911 $ 100,222 $ 187,267 $ 197,445 Other U.S. state government agencies 333,786 217,195 646,544 427,081 Total U.S. state government agencies 445,697 317,417 833,811 624,526 U.S. Federal Government agencies 307,870 374,909 693,442 726,742 International government agencies 171,700 107,460 319,042 238,276 Other, including local municipalities and commercial customers 34,013 18,349 58,539 46,820 Total revenue $ 959,280 $ 818,135 $ 1,904,834 $ 1,636,364 By geography Three Months Ended March 31, Six Months Ended March 31, (in thousands) 2021 2020 2021 2020 United States $ 778,350 $ 702,089 $ 1,568,529 $ 1,380,941 United Kingdom 72,882 63,722 137,668 136,724 Australia 70,947 24,540 126,878 61,975 Rest of world 37,101 27,784 71,759 56,724 Total revenue $ 959,280 $ 818,135 $ 1,904,834 $ 1,636,364 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 — 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. • 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. Of our revenue for the three and six months ended March 31, 2021, approximately $15.2 million and $29.1 million, respectively, were from cash payments made to us prior to October 1, 2020. For the three and six months ended March 31, 2020, we recognized revenue of $22.1 million and $40.1 million, respectively, from payments made prior to October 1, 2019. Contract estimates We are required to use estimates in recognizing revenue from some of our contracts. As discussed in "Note 1. Organization and Basis of Presentation," 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 realization and recognize this estimated fee over the period of delivery. In almost all of the jurisdictions in which we operate, the employment markets have experienced significant changes due to the COVID-19 pandemic. As the pandemic commenced, many employment opportunities were terminated. Our volume of new program participants is beginning to increase as governments shift their focus to addressing the residual impacts of the pandemic such as the economy and unemployment, particularly in those countries where the pandemic has stabilized and economies are beginning to reopen. 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. Our revised estimates of participant numbers are based upon our updated evaluation of probable future volumes. Where we make changes to our estimates, these are recognized on a cumulative catch-up basis. In the three and six months ended March 31, 2021, we reported a benefit to revenue of $7.6 million and $16.0 million, respectively, and a benefit to diluted earnings per share of $0.09 and $0.19, respectively, from changes in estimates. The corresponding change in fiscal year 2020 was a decline of $6.3 million and $7.7 million for the three and six months ended March 31, 2020, 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 that 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. Three Months Ended March 31, Six Months Ended March 31, (in thousands) 2021 2020 2021 2020 Deferred contract cost capitalization $ 11,123 $ 2,666 $ 13,614 $ 3,995 Deferred contract cost amortization 2,143 1,321 4,430 3,497 This amortization was recorded within our "cost of revenue" on our consolidated statements of operations. Remaining performance obligations At March 31, 2021, we had approximately $425 million of remaining performance obligations. We anticipate that we will recognize revenue on approximately 55% of this balance 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 which is allocated entirely to future performance obligations including variable transaction fees or fees tied directly to costs incurred. |
