Revenue from Contracts with Customers (Notes)

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customer [Text Block]

Revenue from Contracts with Customers

We derive revenue from contracts with customers primarily from contracts with the U.S. government in the areas of defense, intelligence, homeland security and other federal civilian agencies. Substantially all of our revenue is derived from services and solutions provided to the U.S. government or to prime contractors supporting the U.S. government, including services by our employees and our subcontractors, and solutions that include third-party hardware and software that we purchase and integrate as a part of our overall solutions. Customer requirements may vary from period-to-period depending on specific contract and customer requirements. We provide our services and solutions under three types of contracts: cost-reimbursable, fixed-price and time-and-materials. Under cost-reimbursable contracts, we are reimbursed for costs that are determined to be reasonable, allowable and allocable to the contract and paid a fee representing the profit margin negotiated between us and the contracting agency, which may be fixed or performance based. Under fixed-price contracts, we perform specific tasks for a fixed price. Fixed-price contracts may include either a product delivery or specific service performance over a defined period. Under time-and-materials contracts, we are reimbursed for labor at fixed hourly rates and are generally reimbursed separately for allowable materials and expenses at cost.

For contracts that do not meet the criteria to measure performance as a right to invoice under the series guidance, we utilize an Estimate at Completion process to measure progress toward completion. We typically estimate progress towards completion based on cost incurred or direct labor incurred. As part of this process, we review information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenue and costs. The risks and opportunities include judgments about the ability and cost to achieve the contract milestones and other technical contract requirements. We make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer and overhead cost rates, among other variables. A significant change in one or more of these estimates could affect the timing in which we recognize revenue on our contracts. For the three months ended September 30, 2020 and 2019, the aggregate impact of adjustments in contract estimates increased our revenue by $4.3 million and $5.9 million, respectively. For the nine months ended September 30, 2020 and 2019, the aggregate impact of adjustments in contract estimates increased our revenue by $9.4 million and $9.0 million, respectively.

We have one reportable segment. Our U.S. government customers typically exercise independent decision-making and contracting authority. Offices or divisions within an agency or department of the U.S. government may directly, or through a prime contractor, use our services as a separate customer as long as the customer has independent decision-making and contracting authority within its organization. We treat sales to U.S. government customers as sales within the U.S. regardless of where the services are performed. We generated 99% of our revenue from sales in the U.S. for both the three months ended September 30,

2020 and 2019. We generated 99% of our revenue from sales in the U.S. for both the nine months ended September 30, 2020 and 2019.

The following tables disclose revenue (in thousands) by contract type, customer and contractor type for the periods presented.

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Cost-reimbursable	$	431,991	$	397,921	$	1,283,522	$	1,129,538
Fixed-price	126,402		120,632		368,316		323,723
Time-and-materials	77,803		60,626		227,762		164,885
Revenue	$	636,196	$	579,179	$	1,879,600	$	1,618,146

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
U.S. Government	$	624,888	$	567,496	$	1,848,043	$	1,583,489
State agencies, international agencies and commercial entities	11,308		11,683		31,557		34,657
Revenue	$	636,196	$	579,179	$	1,879,600	$	1,618,146

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Prime contractor	$	579,858	$	524,370	$	1,712,403	$	1,448,875
Subcontractor	56,338		54,809		167,197		169,271
Revenue	$	636,196	$	579,179	$	1,879,600	$	1,618,146

The components of our receivables are as follows (in thousands):

	September 30, 2020			December 31, 2019
Billed receivables	$	306,362		$	311,061
Unbilled receivables	94,454			99,493
Allowance for doubtful accounts	(17,961		)	(11,578		)
Receivables—net	$	382,855		$	398,976

Receivables at September 30, 2020 are expected to be substantially collected within one year except for approximately $1.7 million, of which a majority is related to U.S. government receivables. We do not believe that we have significant exposure to credit risk as billed receivables and unbilled receivables are primarily due from the U.S. government. The allowance for doubtful accounts represents our estimate for exposure due to compliance, contractual issues and bad debts related to prime contractors.

The following table discloses contract liabilities (in thousands):

	September 30, 2020		December 31, 2019
Contract liabilities	$	40,058	$	27,620

Changes in the balance of contract liabilities are primarily due to the timing difference between our performance and our customers' payments. For the three months ended September 30, 2020, the amount of revenue that was included in the opening contract liabilities balance were $3.8 million. For the nine months ended September 30, 2020, the amount of revenue that was included in the opening contract liabilities balance was $22.3 million.

The remaining performance obligation as of September 30, 2020 is $2.4 billion. The following table discloses when we expect to recognize the remaining performance obligation as revenue (in billions):

For the remaining three months ending December 31, 2020		For the year ending
		December 31, 2021		December 31, 2022		Thereafter
$	0.6	$	1.1	$	0.3	$	0.4