Key Takeaways

• Backlog has no GAAP definition. ASC 606-10-50-13 requires the remaining performance obligation (RPO) disclosure instead, so backlog is a company's own non-GAAP choice about what to count.

• The SEC removed backlog as a listed topic from Regulation S-K Item 101(c) in rules effective November 9, 2020, and Quanta and Johnson Controls still report it.

• Quanta Services reported $15.13 billion of backlog at December 31, 2020, and only $3.99 billion (26.3%) of it was RPO.

• Johnson Controls runs the other way: $19.6 billion of RPO against $13.6 billion of backlog in fiscal 2023, partly because its RPO covers building contracts with initial terms typically of 25 to 35 years.

• Kratos and Knife River use backlog as another name for RPO, so check the filing's definition before comparing two companies.

Does the SEC still require companies to report backlog?

No, the SEC no longer lists backlog as a required topic. Until 2020, Item 101(c)(1)(viii) of Regulation S-K asked for the dollar amount of backlog orders believed to be firm, as of a recent date and a year earlier, with the portion not expected to be filled in the current fiscal year (SEC comment letter).

What changed and what stayed:

• The rule text: the modernized Item 101 took effect November 9, 2020 (Federal Register), and the current paragraph (c)(1) lists five topics, none of them backlog (17 CFR 229.101).

• The test: Item 101(c) now asks only for information material to understanding the business, so backlog is no longer a required line item.

• "Firm" order: Riverbed told the SEC in 2012 that its orders, generally made on individual purchase orders that are cancellable with little or no notice and changeable in quantities and delivery schedules without significant penalty, weren't considered firm.

Where do backlog and RPO diverge?

They diverge when a company counts something RPO excludes, as Quanta does, or when its RPO runs longer than its backlog, as Johnson Controls' does. Quanta Services reconciles the two in its fiscal 2020 10-K, and the gap is large (Quanta 10-K).

RPO is $3,985,382 / $15,132,434, or 26.3% of total backlog. The rest is estimated orders under master service agreements and short-term, non-fixed price contracts. For the master service agreements, Quanta sets the estimate from recurring historical trends and potential renewals, and generally its customers aren't contractually committed to specific volumes under its MSAs.

The reverse happens at Johnson Controls, where RPO ($19.6 billion) exceeds backlog ($13.6 billion) by $6.0 billion in fiscal 2023 (Johnson Controls 10-K). The filing explains the gap this way:

• RPO covers the initial term of the building contract, typically 25 to 35 years, while backlog covers the lifecycle period, approximately five years.

• RPO excludes certain contracts with a term of one year or less and contracts cancellable without substantial penalty, while backlog includes them.

• RPO carries the full remaining term of service contracts with substantial termination penalties, while backlog carries one year.

Which companies report backlog and RPO as the same number?

Some filers simply relabel RPO, and the filings' own wording shows it:

• Kratos: its fiscal 2020 10-K says revenue from remaining performance obligations is "also referred to as total backlog," at $922.2 million, up from $601.2 million (Kratos 10-K).

• Knife River: its fiscal 2024 note says the same for $745.6 million, and its definition counts projects with a letter of intent or notice to proceed, not only signed contracts (Knife River 10-K).

Where a filing includes a reconciliation, as Quanta's and Johnson Controls' do, the two figures are different measures.

Does revenue backlog include deferred revenue?

It depends on the definition, because published definitions disagree:

• Narrow: backlog is unrecognized and uninvoiced revenue, and it isn't deferred revenue.

• Broad: deferred revenue is one component of backlog.

The narrow view has a cost. Take a $100,000 one-year contract paid for six months up front. Under the narrow definition it puts $50,000 in deferred revenue and $50,000 in backlog, yet the formula (total contract value minus recognized revenue) returns $100,000 on day one, so the formula and the definition disagree.

Related terms

Use these pages when a backlog figure needs to be tied back to a standard measure:

• Remaining performance obligation covers the ASC 606 disclosure.

• Deferred revenue waterfall schedules when billed revenue converts to recognized revenue.

• Unbilled revenue covers earned work not yet invoiced.

• Contracted ARR annualizes signed recurring contracts.

• Bookings vs billings vs revenue covers the figures that sit around backlog.

• Minimum commitment covers the committed floor on a usage contract.

FAQ

Is revenue backlog a GAAP measure?

No. ASC 606 requires the RPO disclosure, but backlog is a management measure, and Quanta labels its own figure non-GAAP. Each company chooses its inclusions, so a backlog number from one filer doesn't compare cleanly with another's.

Can backlog be larger than RPO?

Yes. Quanta's backlog was 3.8 times its RPO at the end of 2020 because it adds estimated orders under master service agreements and short-term, non-fixed price contracts. A company whose RPO runs the full term of long building contracts while its backlog covers about five years can show the opposite, as Johnson Controls does. Kratos and Knife River label RPO as backlog, so for them the two are the same number.

Should a usage-based company report backlog?

The old Item 101 asked for backlog orders believed to be firm, which points to counting only the committed part. Quanta shows its estimated service-agreement orders on a separate line instead of folding them into RPO. It also says its customers generally aren't contractually committed to specific volumes under its master service agreements.