Revenue Recognition | NOTE 8 – REVENUE RECOGNITION Disaggregation of Revenue The Company disaggregates revenue from clients, most of which is earned over time, into categories that depict how the nature, amount and uncertainty of revenue and cash flows are affected by economic and business factors. Those categories are client market, client type, and contract mix. Client markets provide insight into the breadth of the Company’s expertise. In classifying revenue by client market, the Company attributes revenue from a client to the market that the Company believes is the client’s primary market. The Company also classifies revenue by the type of entity for which it does business, which is an indicator of the diversity of its client base. The Company attributes revenue generated as a subcontractor to a commercial company as government revenue when the ultimate client is a government agency or department. Disaggregation by contract mix provides insight in terms of the degree of performance risk that the Company has assumed. Fixed-price contracts are considered to provide the highest amount of performance risk as the Company is required to deliver a scope of work or level of effort for a negotiated fixed price. Time-and-materials contracts require the Company to provide skilled employees on contracts for negotiated fixed hourly rates. Since the Company is not required to deliver a scope of work, but merely skilled employees, it considers these contracts to be less risky than a fixed-price agreement. Cost-based contracts are considered to provide the lowest amount of performance risk since the Company is generally reimbursed for all contract costs incurred in performance of contract deliverables with only the amount of incentive or award fees (if applicable) dependent on the achievement of negotiated performance requirements. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Dollars Percent Dollars Percent Dollars Percent Dollars Percent Client Markets: Energy, environment, and infrastructure $ 166,956 36 % $ 156,384 40 % $ 483,415 37 % $ 486,945 42 % Health, education, and social programs 249,034 53 % 182,292 46 % 663,739 51 % 508,161 43 % Safety and security 33,760 7 % 28,311 7 % 96,568 7 % 89,130 8 % Consumer and financial 18,027 4 % 27,073 7 % 60,633 5 % 80,827 7 % Total $ 467,777 100 % $ 394,060 100 % $ 1,304,355 100 % $ 1,165,063 100 % Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Dollars Percent Dollars Percent Dollars Percent Dollars Percent Client Type: U.S. federal government $ 271,255 58 % $ 195,153 50 % $ 714,993 55 % $ 553,378 48 % U.S. state and local government 65,613 14 % 58,792 15 % 195,791 15 % 174,446 15 % International government 23,075 5 % 32,697 8 % 78,978 6 % 107,850 9 % Total Government 359,943 77 % 286,642 73 % 989,762 76 % 835,674 72 % Commercial 107,834 23 % 107,418 27 % 314,593 24 % 329,389 28 % Total $ 467,777 100 % $ 394,060 100 % $ 1,304,355 100 % $ 1,165,063 100 % Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Dollars Percent Dollars Percent Dollars Percent Dollars Percent Contract Mix: Time-and-materials $ 188,758 40 % $ 157,627 40 % $ 523,635 40 % $ 479,712 41 % Fixed price 210,810 45 % 166,053 42 % 580,738 45 % 473,810 41 % Cost-based 68,209 15 % 70,380 18 % 199,982 15 % 211,541 18 % Total $ 467,777 100 % $ 394,060 100 % $ 1,304,355 100 % $ 1,165,063 100 % Contract Balances: Contract assets consist primarily of unbilled amounts resulting from long-term contracts when revenue recognized exceeds the amount billed often due to billing schedule timing. Contract liabilities result from advance payments received on a contract or from billings in excess of revenue recognized on long-term contracts due to billing schedule timing. The following table summarizes the contract balances as of September 30, 2022 and December 31, 2021: September 30, 2022 December 31, 2021 $ Change % Change Contract assets $ 196,811 $ 137,867 $ 58,944 42.8 % Contract liabilities ( 24,599 ) ( 39,665 ) 15,066 ( 38.0 %) Net contract assets (liabilities) $ 172,212 $ 98,202 $ 74,010 75.4 % The net contract assets (liabilities) as of September 30, 2022 increased by $ 74.0 million as compared to December 31, 2021. The increase in net contract assets (liabilities) is primarily due to the timing difference between the performance of services and billings to and payments from customers. The increase of $ 58.9 million in contract assets includes $ 9.9 million at September 30, 2022 from SemanticBits which was acquired during 2022. There were no material changes to contract balances due to impairments or credit losses during the period. During the nine months ended September 30, 2022 and 2021, the Company recognized $ 27.1 million and $ 21.7 million in revenue related to the contract liabilities balance at December 31, 2021 and 2020, respectively. Performance Obligations: The Company had $ 1.4 billion in unfulfilled performance obligations as of September 30, 2022 which primarily reflect the future delivery of services for which revenue will be recognized over time. The obligations relate to continued or additional services required on contracts, including those that are either non-cancellable or have substantive termination penalties, and were generally valued using an estimated cost-plus margin approach, with variable consideration being estimated at the most likely amount. The amounts exclude marketing offers, which are negotiated but unexercised contract options and indefinite delivery/indefinite quantity (IDIQ) and similar arrangements that provided a framework for customers to issue specific tasks, delivery, or purchase orders in the future. The Company expects to satisfy these performance obligations in approximately two years . |