Note 3 - Revenue Recognition

9 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3. Revenue Recognition

The Company records revenue under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. Revenue is recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers.

We evaluate our revenue contracts with customers based on the five-step model under ASC 606: (1) Identify the contract with the customer; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to separate performance obligations; and (5) Recognize revenue when (or as) each performance obligation is satisfied.

The Company derives its revenue from several sources. The Company’s Engineering Services and Information Technology segments perform consulting and project solution services. The Healthcare segment specializes in long-term and short-term staffing and placement services to hospitals, schools and long-term care facilities amongst others. All of the Company’s segments perform staff augmentation services and derive revenue from permanent placement fees. The majority of the Company’s revenue is invoiced on a time and materials basis.

The following table presents our revenue disaggregated by revenue source for the thirteen and thirty-nine week periods ended October 2, 2021 and September 26, 2020:

	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Engineering:
Time and Material	$	11,624	$	10,369	$	33,922	$	33,980
Fixed Fee		4,858		4,660		13,893		9,163
Permanent Placement Services		-		58		67		145
Total Engineering	$	16,482	$	15,087	$	47,882	$	43,288
Specialty Health Care:
Time and Material	$	19,324	$	8,844	$	62,985	$	41,498
Permanent Placement Services		322		171		738		398
Total Specialty Health Care	$	19,646	$	9,015	$	63,723	$	41,896
Information Technology:
Time and Material	$	9,109	$	7,347	$	26,770	$	23,683
Permanent Placement Services		234		112		578		379
Total Information Technology	$	9,343	$	7,459	$	27,348	$	24,062
	$	45,471	$	31,561	$	138,953	$	109,246

Time and Material

The Company’s IT and Healthcare segments predominantly recognize revenue through time and material work while its Engineering segment recognizes revenue through both time and material and fixed fee work. The Company’s time and material contracts are typically based on the number of hours worked at contractually agreed upon rates, therefore revenue associated with these time and materials contracts are recognized based on hours worked at contracted rates. 

Fixed Fee

From time to time and predominantly in our Engineering segment, the Company will enter into contracts requiring the completion of specific deliverables.  The Company has master services agreements with many of its customers that broadly define terms and conditions. Actual services performed under fixed fee arrangements are typically delivered under purchase orders that more specifically define terms and conditions related to that fixed fee project. While these master services agreements can often span several years, the Company’s fixed fee purchase orders are typically performed over six to nine month periods.  In instances where project services are provided on a fixed-price basis, revenue is recorded in accordance with the terms of each contract.  In certain instances, revenue is invoiced at the time certain milestones are reached, as defined in the contract.  Revenue under these arrangements are recognized as the costs on these contracts are incurred.  From time-to-time, amounts paid in excess of revenue earned and recognized are recorded as deferred revenue, included in accounts payable and accrued expenses on the accompanying condensed balance sheets.  Additionally, some contracts contain “Performance Fees” (bonuses) for completing a contract under budget.  Performance Fees, if any, are recorded when earned.  Some contracts also limit revenue and billings to specified maximum amounts.  Provisions for contract losses, if any, are made in the period such losses are determined.  For contracts where there is a specific deliverable and the work is not complete and the revenue is not recognized, the costs incurred are deferred as a prepaid asset.  The associated costs are expensed when the related revenue is recognized.

Permanent Placement Services

The Company earns permanent placement fees from providing permanent placement services. These fees are typically based on a percentage of the compensation paid to the person placed with the Company’s client.

There was $3.9 million of deferred revenue as of October 2, 2021. Deferred revenue was $0.4 million as of January 2, 2021. Revenue is recognized when the service has been performed. Deferred revenue may be recognized over a period exceeding one year from the time it was recorded on the balance sheet. For both of the thirty-nine week periods ended October 2, 2021 and September 26, 2020, the Company recognized $0.4 million that was included in deferred revenue at the beginning of each respective reporting period. For the thirteen week period ended October 2, 2021, the Company did not recognize any deferred revenue recorded at the beginning of the period. For the thirteen week period ended September 26, 2020, the Company recognized $0.3 million of deferred revenue recorded at the beginning of the period.