The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”). The consolidated financial statements include all the Company's direct and indirect wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.

Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting of normal and recurring adjustments) necessary to fairly present the consolidated financial position and the results of operations, changes in stockholders' equity and cash flows of the Company as of the dates and for the interim periods presented. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2019, including the notes thereto, set forth in the Company’s 2019 Annual Report on Form 10-K.

Certain amounts in the consolidated statements of income for the three and nine months ended September 30, 2019 were reclassified to conform to the current year presentation. In 2020, the Company began classifying its Texas payment processing contract in the software & services category. The Company reclassified $7.8 million and $23.2 million of revenues for the three and nine months ended September 30, 2019, respectively, and $6.6 million and $20.5 million of cost of revenues for the three and nine months ended September 30, 2019, respectively, from this contract from the state enterprise category to the software & services category. The reclassification had no impact on net income or cash flows for the periods ended September 30, 2019.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2020.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), to replace the incurred loss impairment methodology in U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables,

companies will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. On January 1, 2020, the Company adopted the standard and all the related amendments, using a modified retrospective approach. The adoption of the standard resulted in a cumulative-effect adjustment to retained earnings of approximately $0.3 million. The adoption of the standard did not have a significant impact on the Company’s consolidated earnings or cash flows.

The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration which the Company expects to receive in exchange for those goods or services.

The Company currently earns revenues from three main sources: (i) transaction-based fees, which consist of interactive government services (“IGS”), driver history records (“DHR”) and other transaction-based revenues, (ii) development services and (iii) fixed-fee services.

The following table summarizes, by reportable and operating segment, the principal activities from which the Company generates revenue for the three months ended September 30 (in thousands):


2020	State Enterprise		Payments		All Other		Consolidated Total
IGS	$	58,192	$	—	$	—	$	58,192
DHR	21,716		—		—		21,716
Other	—		11,266		5,784		17,050
Total transaction-based	79,908		11,266		5,784		96,958
Development services	10,329		—		—		10,329
Fixed-fee services	1,238		—		26,065		27,303
Total revenues	$	91,475	$	11,266	$	31,849	$	134,590

2019	State Enterprise		Payments		All Other		Consolidated Total
IGS	$	46,480	$	—	$	—	$	46,480
DHR	23,076		—		—		23,076
Other	—		9,736		5,890		15,626
Total transaction-based	69,556		9,736		5,890		85,182
Development services	2,463		—		—		2,463
Fixed-fee services	1,238		—		1,502		2,740
Total revenues	$	73,257	$	9,736	$	7,392	$	90,385

The following table summarizes, by reportable and operating segment, the principal activities from which the Company generates revenue for the nine months ended September 30 (in thousands):


2020	State Enterprise		Payments		All Other		Consolidated Total
IGS	$	156,436	$	—	$	—	$	156,436
DHR	65,172		—		—		65,172
Other	—		30,996		16,087		47,083
Total transaction-based	221,608		30,996		16,087		268,691
Development services	18,369		—		—		18,369
Fixed-fee services	3,713		—		28,525		32,238
Total revenues	$	243,690	$	30,996	$	44,612	$	319,298

2019	State Enterprise		Payments		All Other		Consolidated Total
IGS	$	136,826	$	—	$	—	$	136,826
DHR	70,158		—		—		70,158
Other	—		28,973		17,420		46,393
Total transaction-based	206,984		28,973		17,420		253,377
Development services	7,284		—		—		7,284
Fixed-fee services	3,713		—		2,758		6,471
Total revenues	$	217,981	$	28,973	$	20,178	$	267,132

Under the majority of contracts with its government partners, the Company agrees to provide continuous access to digital government services that allow consumers to complete secure transactions, such as applying for a permit, retrieving government records, or filing a government-mandated form or report, in exchange for transaction-based fees. The Company satisfies its performance obligation by providing access to applications over the contractual term and by processing transactions as they are initiated by consumers. The performance obligation is satisfied when the Company provides the access and it is used by the consumer.

The Company earns development services revenues primarily under contracts to provide software development and other time and materials services to its government partners. These contracts are generally not longer than one year in duration. For services provided under development contracts, the performance obligation is either satisfied over time or at a point in time upon customer acceptance. For services provided under development contracts that result in the transfer of control over time, the underlying deliverable is owned and controlled by the customer and does not create an asset with an alternative use to the Company. The Company recognizes revenue on rate per hour contracts based on the amount billable to the customer, as the Company has the right to invoice the customer in an amount that directly corresponds with the value to the customer of the Company’s performance to date.

Under its development services contracts, the Company typically does not have significant future performance obligations that extend beyond one year. As of September 30, 2020, the total transaction price allocated to unsatisfied performance obligations was approximately $6.5 million.

Fixed-fee services revenues primarily consist of state enterprise revenues from providing recurring fixed fee digital government services to the Company’s government partner in Indiana, contracts for the Company's new TourHealth services for rapid and secure COVID-19 testing with Next Marketing and Impact Health, which commenced in August 2020 and other contracts for software-as-a-service (“SaaS”) subscription-based services in the Company's software & services businesses. As of September 30, 2020, the Company’s Indiana contract had unsatisfied performance obligations for one month. The total transaction price allocated to the unsatisfied performance obligation is not significant. TourHealth services contracts are a fixed-

fee single performance obligation to provide continuous access to COVID-19 testing services. As of September 30, 2020, the unsatisfied performance obligations related to these contracts was $12.8 million which is expected to be recognized during the fourth quarter of 2020.

Subscription-based service contracts in the Company's software & services businesses are a fixed-fee single performance obligation to provide government partners continuous access to digital services. As of September 30, 2020, the unsatisfied performance obligations related to these contracts was $18.6 million, which will be recognized over the term of such contracts, generally one - five years.

Unearned revenues at September 30, 2020 and December 31, 2019 were approximately $8.9 million and $3.8 million, respectively. The change in the deferred revenue balance for the nine months ended September 30, 2020 was primarily driven by $27.6 million of cash payments received or due in advance of satisfying the Company's performance obligations, offset by $22.5 million of revenues recognized that were previously included in deferred revenue.

The Company records trade accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts. The Company calculates this allowance based on its history of write-offs, and its relationship with, and the expected future economic status of, its customers. Trade accounts receivable are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. The Company’s allowance for doubtful accounts at September 30, 2020 and December 31, 2019 was approximately $1.9 million and $1.2 million, respectively.